Heineken as SABMiller Poison Pill Warrants Sweeter Bid: Real M&A
2014-09-15 23:00:01.7 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Tara Lachapelle
Sept. 16 (Bloomberg) -- If SABMiller Plc wants to avoid
getting bought, its best bet may be to make Heineken NV an offer
it can’t refuse.
SABMiller is looking to make a large enough acquisition
that would shield it from being acquired by growth-hungry
Anheuser-Busch InBev NV, the world’s largest brewer. London-
based SABMiller had bet that $45 billion Heineken would be the
answer, only to have its takeover offer turned down by the
company’s founding family, which still controls Heineken,
Bloomberg News reported this week.
Even though shares of both Carlsberg A/S and Diageo Plc
rose yesterday on speculation they could be alternative targets
for SABMiller, Heineken is still the most appealing option,
according to Morningstar Inc.’s Philip Gorham. Persuading the
Dutch brewer to sell may require a bid within the upper 70
euros-a-share range -- about a 30 percent premium -- as well as
making concessions such as giving the family board seats and
adding Heineken to the combined company’s name, he said.
“I suspect that as vocal as Heineken has been about not
wanting to sell, everything has its price,” Gorham said in a
phone interview from Amsterdam. “SABMiller could come back to
Heineken. It’s the No. 1 choice. If they don’t get that,
anything else is suboptimal.”
Richard Farnsworth, a spokesman for SABMiller, declined to
comment on whether it will make another attempt to buy Heineken
or any other companies.
Vulnerable SABMiller
Heineken confirmed that it rejected SABMiller in a
statement, saying the proposal is “non-actionable” and that
the Heineken family intends to keep the company independent. The
founding family controls the brewer via another publicly traded
vehicle, Heineken Holding NV, which owns 50 percent of the 150-
year-old business.
The Heineken statement “was very clear,” John Clarke, a
company spokesman, wrote in an e-mail yesterday.
The rejection leaves SABMiller more vulnerable to being
acquired by AB InBev, the maker of Budweiser and Stella Artois.
The ball is in the Belgian company’s court to move forward with
the long-speculated merger -- unless SABMiller can persuade
Heineken’s family to sell.
“It’s just very difficult in those sorts of family
circumstances where there’s more than just money involved,
there’s emotions,” Wyn Ellis, a London-based analyst for Numis
Securities Ltd., said in a phone interview. “From what Heineken
said, it looks to me that the definitive answer is no.”
SABMiller has “sensible people, so I guess they would not
have made the approach unless they felt there was a chance of
certain success,” Ellis said.
Potential Price
While the price that SABMiller offered hasn’t been made
public, Heineken shares climbed 1.3 percent to 60.18 euros
yesterday, valuing the company at almost 11 times this year’s
estimated earnings before interest, taxes, depreciation and
amortization.
SABMiller, valued at $98 billion yesterday, could justify
paying a “low teens” Ebitda multiple given the opportunity it
would have to expand the Heineken brand in Asia, one of the
faster-growing beer markets, Gorham of Morningstar said.
“It leaves some room to go higher” from yesterday’s
closing level, he said. “I wouldn’t rule out a high 70s takeout
price.”
If SABMiller were to pay 78 euros a share for Heineken
entirely in cash, it would result in a 16 percent increase to
next year’s earnings, according to data compiled by Bloomberg.
Lesser Alternatives
SABMiller may have other options should Heineken continue
to resist, though they also appear flawed. One is to pursue a
deal with Carlsberg, the Danish brewer that was valued at $15
billion yesterday after rising 2.7 percent, except it’s
controlled by a foundation that also may not be willing to sell,
said Ellis of Numis.
Carlsberg’s brands are less appealing than Heineken, and
Carlsberg’s biggest developing market is Eastern Europe, which
isn’t growing as quickly as other developing regions, Gorham
said. While Heineken and AB InBev’s brands ranked among last
year’s top 10 beers by volume, none of Carlsberg’s beers made
the list, according to Bloomberg Intelligence.
Another idea is to buy Groupe Castel’s African beer
operations, in which SABMiller already has a 20 percent stake,
though that may not provide enough scale, he said.
There’s also Diageo, which surged 2.2 percent yesterday,
its biggest gain since April. The $76 billion company focuses on
liquors such as Johnnie Walker and Smirnoff and is unlikely to
be interested in merging with SABMiller or selling its Guinness
beer brand to SABMiller, according to Ian Shackleton and Edward
Mundy, analysts from Nomura International Plc.
Changing Minds
“That SABMiller’s inorganic options have been so publicly
lessened puts AB InBev in an even stronger position, should it
choose to make a move on SABMiller,” Eddy Hargreaves, an
analyst at Canaccord Genuity Group Inc., wrote in a note
yesterday. “SABMiller shareholders may be even more likely now
to welcome a bid.”
Perhaps management would be, too, said Bryan Keane, a money
manager at Alpine Woods Capital Investors LLC, which oversees
$4.5 billion and owns AB InBev stock.
Being rebuffed by Heineken “may make SABMiller change
their position and be more open to discussing a deal with AB
InBev,” Keane said in a phone interview from Purchase, New
York. “They’re very complementary businesses.”
If SABMiller is still opposed to being taken over, then
it’s going to need to buy an international brand like Heineken,
said Chris Wickham, a London-based analyst at Oriel Securities
Ltd. While the company sells a variety of beers in places such
as Africa and Latin America, there isn’t one that has gained
global enough popularity, Wickham said in a phone interview.
“If you’re an international beer company and you don’t
have an international beer brand, there’s no real reason for you
to exist,” he said.
For Related News and Information:
AB InBev Pursuit of SAB Seen Benefiting From Heineken Rejection
NSN NBXYUX6VDKHU <GO>
SABMiller Spurned by Heineken Family After Making Approach
NSN NBXL6G6VDKHS <GO>
AB InBev as King of Deals Builds Case for SABMiller: Real M&A
NSN N1VQW16S972S <GO>
Bloomberg Intelligence - Beverage Industry: BI BEVGG <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Whitney Kisling
2014-09-15 23:00:01.7 GMT
(For a Real M&A column news alert: SALT REALMNA <GO>.)
By Tara Lachapelle
Sept. 16 (Bloomberg) -- If SABMiller Plc wants to avoid
getting bought, its best bet may be to make Heineken NV an offer
it can’t refuse.
SABMiller is looking to make a large enough acquisition
that would shield it from being acquired by growth-hungry
Anheuser-Busch InBev NV, the world’s largest brewer. London-
based SABMiller had bet that $45 billion Heineken would be the
answer, only to have its takeover offer turned down by the
company’s founding family, which still controls Heineken,
Bloomberg News reported this week.
Even though shares of both Carlsberg A/S and Diageo Plc
rose yesterday on speculation they could be alternative targets
for SABMiller, Heineken is still the most appealing option,
according to Morningstar Inc.’s Philip Gorham. Persuading the
Dutch brewer to sell may require a bid within the upper 70
euros-a-share range -- about a 30 percent premium -- as well as
making concessions such as giving the family board seats and
adding Heineken to the combined company’s name, he said.
“I suspect that as vocal as Heineken has been about not
wanting to sell, everything has its price,” Gorham said in a
phone interview from Amsterdam. “SABMiller could come back to
Heineken. It’s the No. 1 choice. If they don’t get that,
anything else is suboptimal.”
Richard Farnsworth, a spokesman for SABMiller, declined to
comment on whether it will make another attempt to buy Heineken
or any other companies.
Vulnerable SABMiller
Heineken confirmed that it rejected SABMiller in a
statement, saying the proposal is “non-actionable” and that
the Heineken family intends to keep the company independent. The
founding family controls the brewer via another publicly traded
vehicle, Heineken Holding NV, which owns 50 percent of the 150-
year-old business.
The Heineken statement “was very clear,” John Clarke, a
company spokesman, wrote in an e-mail yesterday.
The rejection leaves SABMiller more vulnerable to being
acquired by AB InBev, the maker of Budweiser and Stella Artois.
The ball is in the Belgian company’s court to move forward with
the long-speculated merger -- unless SABMiller can persuade
Heineken’s family to sell.
“It’s just very difficult in those sorts of family
circumstances where there’s more than just money involved,
there’s emotions,” Wyn Ellis, a London-based analyst for Numis
Securities Ltd., said in a phone interview. “From what Heineken
said, it looks to me that the definitive answer is no.”
SABMiller has “sensible people, so I guess they would not
have made the approach unless they felt there was a chance of
certain success,” Ellis said.
Potential Price
While the price that SABMiller offered hasn’t been made
public, Heineken shares climbed 1.3 percent to 60.18 euros
yesterday, valuing the company at almost 11 times this year’s
estimated earnings before interest, taxes, depreciation and
amortization.
SABMiller, valued at $98 billion yesterday, could justify
paying a “low teens” Ebitda multiple given the opportunity it
would have to expand the Heineken brand in Asia, one of the
faster-growing beer markets, Gorham of Morningstar said.
“It leaves some room to go higher” from yesterday’s
closing level, he said. “I wouldn’t rule out a high 70s takeout
price.”
If SABMiller were to pay 78 euros a share for Heineken
entirely in cash, it would result in a 16 percent increase to
next year’s earnings, according to data compiled by Bloomberg.
Lesser Alternatives
SABMiller may have other options should Heineken continue
to resist, though they also appear flawed. One is to pursue a
deal with Carlsberg, the Danish brewer that was valued at $15
billion yesterday after rising 2.7 percent, except it’s
controlled by a foundation that also may not be willing to sell,
said Ellis of Numis.
Carlsberg’s brands are less appealing than Heineken, and
Carlsberg’s biggest developing market is Eastern Europe, which
isn’t growing as quickly as other developing regions, Gorham
said. While Heineken and AB InBev’s brands ranked among last
year’s top 10 beers by volume, none of Carlsberg’s beers made
the list, according to Bloomberg Intelligence.
Another idea is to buy Groupe Castel’s African beer
operations, in which SABMiller already has a 20 percent stake,
though that may not provide enough scale, he said.
There’s also Diageo, which surged 2.2 percent yesterday,
its biggest gain since April. The $76 billion company focuses on
liquors such as Johnnie Walker and Smirnoff and is unlikely to
be interested in merging with SABMiller or selling its Guinness
beer brand to SABMiller, according to Ian Shackleton and Edward
Mundy, analysts from Nomura International Plc.
Changing Minds
“That SABMiller’s inorganic options have been so publicly
lessened puts AB InBev in an even stronger position, should it
choose to make a move on SABMiller,” Eddy Hargreaves, an
analyst at Canaccord Genuity Group Inc., wrote in a note
yesterday. “SABMiller shareholders may be even more likely now
to welcome a bid.”
Perhaps management would be, too, said Bryan Keane, a money
manager at Alpine Woods Capital Investors LLC, which oversees
$4.5 billion and owns AB InBev stock.
Being rebuffed by Heineken “may make SABMiller change
their position and be more open to discussing a deal with AB
InBev,” Keane said in a phone interview from Purchase, New
York. “They’re very complementary businesses.”
If SABMiller is still opposed to being taken over, then
it’s going to need to buy an international brand like Heineken,
said Chris Wickham, a London-based analyst at Oriel Securities
Ltd. While the company sells a variety of beers in places such
as Africa and Latin America, there isn’t one that has gained
global enough popularity, Wickham said in a phone interview.
“If you’re an international beer company and you don’t
have an international beer brand, there’s no real reason for you
to exist,” he said.
For Related News and Information:
AB InBev Pursuit of SAB Seen Benefiting From Heineken Rejection
NSN NBXYUX6VDKHU <GO>
SABMiller Spurned by Heineken Family After Making Approach
NSN NBXL6G6VDKHS <GO>
AB InBev as King of Deals Builds Case for SABMiller: Real M&A
NSN N1VQW16S972S <GO>
Bloomberg Intelligence - Beverage Industry: BI BEVGG <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Whitney Kisling