Analysts say Argentinean deal would make sense

Analysts say Argentinean deal would make sense

SABMiller has declined to comment on speculation that it is eyeing a move for Argentina's third largest brewer, a deal that analysts believe would make sense for the brewer after it failed to acquire FEMSA Cerveza.

SABMiller is in talks to buy the Buenos Aires-based Isenbeck brewer, according to Argentinean newspaper El Cronista, which did not cite sources.

Isenbeck, which is owned by German brewer Warsteiner, sits third behind Chile-based CCU and Anheuser-Busch Inbev on Argentina's beer market.

Following Heineken's acquisition of FEMSA Cerveza, Isenbeck is considered one of the few remaining opportunities for multinational brewers to expand their footprint in Latin America. It is thought the group, which has around a 7% share of the Argentinean beer market, could fetch up to US$300m.

An SABMiller spokesperson declind to comment on the speculation when contacted by just-drinks, but analysts believe Isenbeck is likely on the brewer's radar.

"There are only a few opportunities left in Latin America and, in that context, this brewery would make strategic sense for SABMiller," Trevor Stirling, analyst with Sanford C Bernstein, told just-drinks today (1 February).

AmBev, the division of A-B InBev, controls around three quarters of Argentina's beer market. CCU, which is partnered with Heineken, has a 16% share.

"Isenbeck is a long way behind the top two in the market, but I don't think that would bother SABMiller too much," said Stirling, referring to the group's track record of building share from a low base, particularly in Eastern Europe.

Argentina is the fourth fastest growing beer market in Latin America and has seen the third strongest economic growth in the region over the past three years, according to Bernstein.

Isenbeck could also offer SABMiller an avenue into Brazil, which is again dominated by AmBev but is also the fourth largest beer market in the world.

"This would be a small deal, providing a position in Argentina and a toehold into Brazil, almost akin to SABMiller’s move into Nigeria via the local brewer Pabob Breweries," said Chris Pitcher, of analyst group RedBurn Partners.

Earlier this month, SABMiller walked away from talks with FEMSA, despite being the favourite to seal a deal. Sources close to the situation cited deal price and distribution issues in Brazil as major sticking points.

SABMiller already has a strong position in Latin America, largely via its ownership of Bavaria in Colombia, and the region contributes around 30% of SABMiller's global EBITDA.

However, the brewer last week trimmed its forecast for volume growth in Latin America for the current fiscal year, to a range of 4% to 6% from previous guidance of 5% to 7%. The move reflects the economic downturn and also plans for a five-fold tax rise on beer in Colombia, according to the group's president for Latin America, Barry Smith.