Global beer maker SABMiller is joining forces with Turkey’s Anadolu Efes to become the number two operator in Russia in a deal which gives the London-based group a 24 percent in the leading Turkish brewer.
SABMiller, which last month agreed to buy Australian rival Foster’s for $10 billion, said yesterday the deal will put it behind Carlsberg in the world’s fourth largest beer market and yield cost savings of $120 million a year.
Under the deal, SABMiller will swap its Russian and Ukrainian beer business for a 24 percent stake in Anadolu Efes, with Anadolu Group, controlled by the Turkish Yazıcılar and Özilhan families, holding 42.8 percent, leaving a free float of just over 33 percent following a capital increase.
The agreement came as SABMiller reported weaker-than-expected first-half beer volume figures due to poor performances in Europe Europe and China and warned margins were “constrained” by higher commodity costs and increased marketing spending.
“The strategic alliance may go some way to countermanding investor concern over SAB’s European exposure, with the deal set to bolster the group’s position in Russia,” said analyst Martin Deboo at Investec Securities.
The move will give the combined group around 18 percent of the Russian beer market by volume similar to Anheuser-Busch InBev and behind Carlsberg’s share of nearly 40 percent. In value terms, the new group will be ahead of AB InBev.
Analysts added it was a sensible move for SABMiller to bring together the number four and five players in Russia- joining Efes’s 11 percent market share to SABMiller’s 7 percent to move ahead of former number three player Heineken – and would put pressure on the Dutch brewer and also AB InBev.
SABMiller shares rose 0.8 percent to 2,280 pence, near its record high hit in July of 2,372 pence while Anadulo Efes increased 5.4 percent to 21.65 lira by 1230 GMT.
The alliance will be the focus of both groups’ interests in Turkey, Russia and the former Soviet Union, central Asia and the Middle East, and will include the Turkish group’s 89 percent share of its domestic beer market.
The deal puts an enterprise value of around $1.9 billion on SABMiller’s Russian and Ukrainian business, and values these assets at around 13 times historic EBITDA profits and in line with previous deals in the brewing world, analysts said.
Both parties had been considering a partnership for some time and SABMiller’s Chief Executive Graham Backay said the move would boost their growth prospects in the region, strengthen their position in Russia and give costs savings.
Under the deal, expected to be completed by the end of 2011, SABMiller and Anadolu have first rights over each other’s shares if either party seeks to sell shares in Anadolu Efes.
“Although SAB obtains only a minority stake today, the deal provides it with the right of first refusal in any future sale by the controlling Efes shareholder, which is relevant in a world with fewer beer acquisitions left available,” said Citi Citi analyst Adam Spielman.
The deal may also put up a further hurdle to a much speculated possible future move by AB InBev for SABMiller.
Russian anti-trust problems would be added to concerns over the U.S. and Chinese markets for any $80 billon potential deal to unite the world’s top two brewers.
SABMiller was advised by Nomura in the transaction and Anadolu Efes by Rothschild.
SABMiller also said its underlying beer volumes rose 3 percent in the first half (April-September) of its financial year compared with a Reuters survey of analysts which forecast a 4 percent rise, due largely to poor summer weather in Europe and and flooding in China.
The group added that trading in its first half had been in line with its own expectations. SABMiller reports half-year profits on Nov. 17.