ABInBev & SABMiller: The “looming” Merger

Since the recent announcement by the Diageo Group, owners of the Guinness brand, of plans to up its stake in its Nigerian business, Guinness Nigeria Plc by as high as 70 percent, experts in the capital market and other stakeholders in Nigerian the beer industry have not made any comment of significance, apparently oblivious of the raisons d’etre behind a deal that could potentially significantly dilute the stakes of all Nigerian shareholders in Guinness Nigeria PLC.

But as the numbers are quickly coming together, those who are in the market for the money and not for the game should be meeting their stock advisers to know if this is potentially the sell-time that will fulfill Diageo’s apparent cash-out game and at the same time swell their purses.

The truth is that Diageo is interested in the talks between Anheuser-Busch InBev, aka, ABInBev, the global brewing giant with roots in Brazil but which is not just a major force in the United States beer market but is also number one in the world, and SABMiller, the UK-headquartered South African beer giant that is world number two.

For some weeks now, talks of the merger between the world number one brewer, ABInVev and number two, SABMiller have dominated reportage in major wire services, But it is actually the anticipatory repositioning in Nigeria that is quite interesting.

Few weeks after rumours began to fly in the global capital market about the looming combination between ABInBev and SABMiller, Guinness made a sudden announcement that the Diageo family was looking to increase its stake in Guinness Nigeria to as high as 70 percent from the present 54.3 percent.

According to report, Diageo intends to launch a partial tender offer at a price not higher than NGN 175 per share in cash, giving all shareholders the opportunity to elect to sell some or all of their shares in Guinness Nigeria through its wholly owned subsidiary Guinness Overseas Limited on receiving regulatory approval to go ahead”

Even the general “Nigeria” public that wants to be drinking Budweiser in the country pretty soon might also be interested in what these three brewers, ABInBev, SABMiller and Guinness have in their bags of investible dollars.

ABInBev are hugely interested in taking the Diageo opportunity in Nigeria for very quick wins. Guinness Nigeria was strong brands like Guinness Stout, Harp Lager and Malta Guinness, brands that can give very quick wins for the new company.

Interestingly, what Diageo is trying to avoid in Nigeria and, maybe, Africa is really the pie ABInBev is desperate to pluck off the African sky. The giant brewer of Belgian origin has no foothold in Africa and is interested in having strong presence in the continent. SABMiller on the other hand, began its journey and a brewer of note from South Africa and actually has the bigger market share in the Southern and Central African regions.

These will become ABInBev’s to have once the takeover comes through. On the one hand, Bloomberg suggested that ABInBev needs the deal more than SABMiller. The deal is all about Africa, the fattest growth frontier in the world today.

If Guinness sells to the company that will be produced by the combo of ABInBev and SABMiller, world’s number 3, Heineken Group will come under heavy squeeze in Nigeria and the rest of Africa, where the heavy financial muscle and economy of scale of the coming combo might prove quite tough.

Diageo had begun its moves to concentrate on spirits a while back but the industry just might not have noticed. Back in July 2015, the brand offloaded all its interests in a partnership it had with Heineken for the South African market. Driven by the need to weaken the dominance of SABMIller in Southern Africa, Heineken and Diageo joined forces on a brewery project, the Sedibeng brewery in Gauteng, South Africa. But Diageo sold its entire stakes in this and other ventures to Heineken.

But Heineken needs to worry about what the combo of ABInBev, SABMiller and a potential addition of Guinness will mean for its business in Nigeria. Nigeria is the most attractive apple in ABInBev’s covetous eyes and they will come to town with an array of products that might challenge Heineken, especially at the premium levels.

Budweiser will be placed against Heineken beer to challenge for the premium market while Castel will fight Gulder and Star Lager in the middle-to-top segment. If as the suspicion goes, Guinness sells, then Legend Extra Stout will find it real hard with the huge budget the expected new company will bring to bear on the marketing of Guinness Extra Stout.


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