COMMENT: S&N the unlikely piece in SCAR jigsaw
SCAR, as it was referred to in a leaked document by Interbrew's banker's last year, is back on the cards, according to reports in the press over the weekend.
The deal, which would see a three-way merger between Miller Brewing, Scottish & Newcastle and South African Breweries, is supposedly being discussed and US sources claim an announcement could be made as early as March.
In the present climate of consolidation, it is no wonder that rumours and speculation of this sort appear regularly and the leaked documents and "sources close to the company" may just be an attempt by players on the market to discover the intentions of their rivals.
However, there are tangible benefits to the SCAR tie up, which may mean it is more than just another rumour. The business would be second only to Anheuser-Busch in terms of size, giving it significant muscle in the brewing industry, a good mixture of markets and, with SAB, healthy potential for growth.
Furthermore, analysts at investment bank WestLB Panmure revealed in a research note today that SAB had confirmed to them in a meeting that it "does not fully expect to end this year in the same state as it now exists." The note goes on: "They [SAB] fully expect to acquire/be acquired or merge with a suitable partner."
And yet despite these positives WestLB still had doubts about the logic of SCAR, in particular the role of S&N. Firstly there is the continued complications concerning S&N's payments for Kronenbourg, which may still see Danone taking a joint stake in running the French brewer. This WestLB describes as "a poison pill in the short term".
There is also some doubt over the synergies between Miller and S&N.
The key therefore is SAB's participation in the deal, which will act as the growth driver in any tie-up. Indeed, with the greater synergies available to Miller through an SAB tie up, would an SAB/Miller merger make more sense on its own?
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