SABMiller has a partnership with Castel in Africa

SABMiller has a partnership with Castel in Africa

SABMiller would have to pay up to US$27bn for Africa's second-largest brewer, Castel, if the family-run company chose to sell up, an analyst has estimated.

SABMiller has right of first refusal on any outside share transfers for Castel, which is led by 80-year-old founder Pierre Castel, Bernstein analyst Trevor Stirling said today (27 June). There is no sign Castel wants to sell, Stirling said, however the analyst added: “Strategically, we believe (Castel) is one of most attractive sizeable beer assets which remain independent.”

“Africa is probably the most attractive region for long-term profit growth for the global brewers,” Stirling said, citing the continent's large population and strong GDP growth. “Latin America has stronger margins today but African margins have more headroom and better long-term growth prospects.”

SABMiller is already working with Castel in Africa: In 2001, SABMiller acquired 20% of Castel's African Beverages operations and Castel acquired 38% of SABMiller Africa and SABMiller Botswana. An update of the partnership early last year saw the two combine their Nigerian businesses under SABMiller's control with their Angolan businesses set to be handled by Castel.

Sterling estimated that SABMiller would require a rights issue to fund a Castel buyout unless the transaction were made after the brewer pays down most of the debt from its acquisition of Foster's in 2011. If a deal was struck for $27bn, it would take ten years for Castel to start contributing to SABMiller's earnings, Stirling estimated. The buyout figure would be lower if some units within Castel chose not to be bought or SABMiller decided not to buy them for "political reasons", Stirling added.

SABMiller is Africa's biggest brewer, with 38% of the region's profits, according to Bernstein figures. Castel is second with 25% and Heineken third with 18%.

Last month, SABMiller said it is preparing three new building projects in Africa for this year alongside a possible expansion in Nigeria.