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Colombia: One of the world’s largest breweries, Anheuser-Busch Cos. Inc., may have an opportunity to acquire South America's largest remaining independent brewer and establish a strong presence there, Saint Louis Business Journal commented on March 14.

Beyond Mexico, Anheuser-Busch does not have a foothold in Latin America. The St. Louis-based company owns 50.2 percent of Diblo, the operating subsidiary of Grupo Modelo, Mexico's largest brewer. But Anheuser-Busch sold its 20 percent stake in Chile's largest brewer, Compania Cervecerias Unidas S.A. (CCU), in November after Heineken acquired a controlling interest in CCU in 2003.

Colombian brewer Grupo Empresarial Bavaria confirmed in late February that the company is considering a sale. Bavaria's shareholders are "exploring a series of alternatives, which could include a merger or a search for a strategic partner," said Bavaria President Ricardo Obregon, according to published reports. The company, which has a virtual monopoly in Colombia, Peru and Ecuador and an 80 % market share in Panama, could fetch between $7 billion and $8 billion, according to analyst estimates. Bavaria has a market capitalization of nearly $5 billion plus debt of almost $2 billion. Its dominant position combined with Latin America's emergence as a high-growth area for beer sales is expected to attract interest from all of the world's largest brewers.

Global competitors InBev of Belgium, Heineken of the Netherlands and, to a lesser extent, London-based SABMiller have had more success expanding their stakes within South America's consolidating beer industry. InBev dominates in Brazil and Argentina, Heineken has a strong position in Chile and SABMiller has a small presence in Honduras and Panama.

Control of Bavaria would give Anheuser-Busch a strong position in South America and an opportunity to boost revenue growth. "The opportunities for acquisition within Latin America have shrunk," said Mark Swartzberg, a beverage industry analyst with Legg Mason Wood Walker in New York. "Pressures on growth are increasing, and growth in the U.S. beer business is slowing, so the importance of international sales is increasing."

Anheuser-Busch has focused its foreign investment in Eastern Europe and China, where it acquired Harbin Brewery Group for $639 million last year and owns 97 percent of Budweiser Wuhan International Brewing Co. Ltd. and 9.9 % of Tsingtao Brewery Co. Ltd. But a South American acquisition could still fit into Anheuser-Busch's strategic plans, analysts said. "Anheuser-Busch has shown with acquisitions in China that it is looking to acquisitions to fuel growth," said Charles Georgas, an analyst with Marquis Investment Research in Chicago. "South America is very much an emerging market with high growth."

A potential sticking point for Anheuser-Busch, however, is that multi-billionaire Julio Mario Santo Domingo, whose family controls about 70 percent of Bavaria's shares, has indicated he may want a partial ownership stake in Bavaria's acquirer as part of a deal. Anheuser-Busch might not want to relinquish significant control to a third-party investment group, Georgas said.

A buyout would come with some risks. An acquisition of this size would require any acquirer to take on additional debt. And after InBev adjusts to its acquisition of AmBev in Brazil, it could be poised to make a competitive push into Bavaria's stronghold markets, Georgas said.

SABMiller and Heineken are considered top acquisition contenders along with Anheuser-Busch. Bavaria, whose brands include Aguila, Cristal and Pilsener, confirmed a group of Heineken executives visited Bavaria's headquarters in Bogota on Feb. 8.

InBev took over Brazilian giant AmBev last year to become the world's largest brewer. But analysts expect it may pass on Bavaria due to its ongoing digestion of AmBev.


16 March, 2005