E-Malt.com News article: Russia & Colombia: Heineken should better invest in Russia than buy Bavaria, analyst says

Dutch brewing giant, Heineken NV, should focus on Russian expansion and let SABMiller Plc buy Colombia's Grupo Empresarial Bavaria, Bloomberg cited Fortis analyst Sebastiaan Schreijen.

“We believe the best outcome for Heineken might actually be that SABMiller buys Bavaria,'' Schreijen wrote in a note to investors today. “A stake in Bavaria would likely stretch the financial room in the balance sheet. We rather see Heineken using its financial headroom for acquisitions in Russia.''

The limiting factor for Heineken in making such a bid is the Heineken family, which has a controlling stake that it apparently isn't ready to dilute, Schreijen wrote. Heineken can probably manage to pay 4.2 billion euros ($5.1 billion) and Bavaria may go for $6 billion to $11 billion based on current valuations, he wrote. He has a ``buy'' rating on the shares.

Heineken said in April that it was one of several brewers interested in Bavaria as demand for beer in emerging markets outpaces consumption in the U.S. and Western Europe. Heineken has said it wouldn't be interested in the brewer for $9 billion.

Beermakers have spent more than $72 billion on acquisitions in the past five years to seek growth in new markets, data compiled by Bloomberg show. Heineken agreed to buy Russia's Patra Brewery in May to help boost its share of that market, adding almost 1 percentage point to 8.3 %.

The beer market in Russia, which has 144 million people, has doubled in size since 1999 as incomes rose and consumers switched to costlier drinks, and it should expand by 6 percent in 2005, UBS has said. Russians drank 54 liters of beer per capita in 2004, and that figure may climb to 70 liters by the end of 2010, according to the bank.

Consumers in Latin America drink an average 30.4 liters of beer a year, compared with 63 liters in Europe. AmBev, as Cia. de Bebidas das Americas is known, is the region's largest brewer, with a 68.1 percent share of the Brazilian market. InBev NV, located in Leuven, Belgium, bought Sao Paulo-based AmBev last year to become the world's second-largest brewer and to gain a foothold in Brazil and five more of the world's seven fastest- growing beer markets.


26 June, 2005