E-Malt.com News article: India: SABMiller eyes Mt Shivalik stake to share UB heights

SABMiller could trigger another M&A play in the Indian beer industry frothing up the duel with United Breweries (UB) for market leadership, The Economic Times of India announced, December 21.

The global brewing giant may unveil an offer to buy stake in Mount Shivalik Group, makers of Thunderbolt strong beer, accounting for about 6% of the growing domestic consumption.

The deal could carry an enterprise valuation of Rs 300/350 crore, sources said.

The BD Bali family-controlled Mount Shivalik with two breweries in Punjab and Rajasthan has mandated ABN AMRO to look at strategic options. SABMiller could eye at least 50% equity stake or a complete buyout of the largest independent brewer in the country.

Sources said other global players like Carlsberg could enter the fray, but SABMiller was expected to be a serious contender what with its CEO, Graham Mackay, being a firm believer in India.

The $14-billion beer behemoth has invested over $600 million in the country over the last six years. A potential buy into Mount Shivalik would see SABMiller's market share jump to nearly 44% bringing it almost on par with UB's 45% share.

In FY'07, UB has seen its share drop marginally, especially in the northern states with SABMiller and Mount Shivalik being the beneficiaries. The Indian beer market is expected to report depletion of around 130 million cases (of 7.8 litres each) in the current year reporting 25-30% growth.

We would not like to comment at this stage, a SABMiller spokesperson told ET from London. Rajeev Bali, director of Mount Shivalik, said: ABN AMRO has been working with us for a while. We are considering various options for expansion. We are talking to various parties, but it is absolutely open right now.

Sitting at the heart of the growth hotspot, Mount Shivalik has seen its valuation soar in recent times compared to the $35-40 million offer Asia Pacific Breweries (APB), a Singapore-based arm of Heineken, made recently.

The trade reforms in the northern states of Punjab, Haryana and Rajsthan have seen beer sales zoom adding buoyancy to the overall domestic beer consumption during the year.

Further, sources said Mount Shivalik could well be the last interesting buy for any global brewer as it commands a superior quality market share amongst the surviving independent players, which include Mohan Meakin, Dewan Breweries, and Lilasons.

SABMiller Plc CEO, Graham Mackay, told ET on a recent visit that acquisitions in markets like India and Russia were becoming expensive with the volume of M&A activity coming down and family-controlled businesses seeking a significant premium.

It must be mentioned that SABMiller had placed a bid for majority stake in Mohan Meakin's beer business after the promoter family invited business. However, the deal process has been in limbo for a while now.

Earlier this year, SABMiller inked $120-million deal to buy the brand rights and beer assets of Foster's in India giving it an additional 2% share of the domestic consumption.


22 December, 2006