just On Call - JP Morgan analysts discuss Foster's Group
SABMiller, Grupo Modelo only real contenders for Foster's Group?
There continues to be doubt that Anheuser-Busch InBev would back a Grupo Modelo move for Foster's Group, while SABMiller's interest in the Australian brewer looks lukewarm, according to JP Morgan analysts.
Grupo Modelo has the finances to acquire Foster's Group in a deal that would bolster its earnings, the analysts said on a conference call today (16 June). "Modelo has never had any debt and so it is literally sitting on US$2bn of cash," said Alan Alanis.
However, Anheuser-Busch InBev must give its permission to Modelo for any move, by virtue of the Budweiser brewer's 50% non-controlling stake in the Mexican beer group. A-B InBev's attitude remains the most likely stumbling block to a deal, even though any acquisition would not likely affect A-B InBev's net debt to EBITDA ratio, Alanis said.
As speculation around Foster's continues to froth, the analysts also considered other potential bidders.
SABMiller has long been cited as the frontrunner to acquire Foster's, which is now effectively a pureplay Australian beer business following its demerger last month.
Matthew Webb said that SABMiller has been "unusually forthcoming" in stating its interest in Foster's. However, he added: "I think it is limited in that they don't see it as a strategic acquisition. They don't see it as a deal that they have to do."
London-based Webb argued that SABMiller would look at the Foster's deal in "strict financial terms", which could mean that the asking price proves prohibitive. Foster's has traded at around AUD9bn on the Australian Stock Exchange in the last week, although its share price has spiked considerably amid the takeover speculation.
According to Webb, SABMiller "could just about get the numbers to add up by paying a small premium...10% above Foster's share price". This, he said, would lead to low single digit earnings accretion from the deal over the next few years. He said, though, that the Peroni Nastro Azzurro brewer will find it "difficult to get numbers to add up with any significant premium paid".
Webb's colleague, Mike Gibbs, added that, while SABMiller could shoot for Foster's, it might prefer to keep its powder dry for another asset that offers stronger growth potential. That asset could be Castel's African beer business, he said.
Other brewers previously cited as potential suitors for Foster's appear to be melting away. "Molson Coors is interested in doing deals and they've said as much," said John Faucher. But, he said that he does not believe that the Canada-based brewer remains seriously interested in Foster's. Its strategy, he said, is "really more about emerging markets".
Stuart Jackson downplayed potential interest from Japan's Asahi, which appears more interested in China. Meanwhile, of the other global brewers, Heineken is still paying down debt and paying off its acquisition of FEMSA Cerveza. Carlsberg is focused on Asia and is not thought to be in the frame.
To view just-drinks' timeline of the Foster's demerger, click here.
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