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JOHANNESBURG, South Africa - South African Breweries Plc (SAB) this morning acknowledged it has been in talks with Philip Morris about the U.S. firm's Miller brewing unit, Reuter's reported, in a takeover deal that would create the world's second-largest beer maker.
"These discussions are at a preliminary stage and no conclusions have been reached," SAB said in a statement, adding that it was also talking to other brewers about consolidation.
SAB has been looking to expand out of its traditional developing markets and away from the weak South African rand. The company may be prepared to purchase Miller for about $5 billion according to The Wall Street Journal.
SAB's shares are up 4.0 percent in London and up 5.2 percent in Johannesburg on the news.
Analysts at Credit Suisse First Boston told Reuters that a deal would be good for SAB, cutting its exposure to the ever-weakening South African rand from around 50 percent to around 25 percent.
Yet many industry-watchers doubt whether SAB would be any more successful than Philip Morris in competing with number one brewer Anheuser-Busch in the U.S. market.
"I don't think it's the best strategic avenue for them. I think there are better avenues for them to realize value, and Miller's growth profile is not particularly attractive," said Gavin Vorwerg, an analyst with Deutsche Securities in Johannesburg, according to a news report.
SAB brews two-thirds of Africa's beer and is number two in China, with a strong presence in eastern Europe as well.
A Miller deal would add to the recent upheaval in the brewing industry. Whitbread, Bass and Kronenbourg have all changed hands over the past two years, as the world's leading breweries look to expand in a traditionally fragmented market.