Analysis - Bolt-on buys best way forward for Carlsberg's M&A

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Carlsberg's future M&A activity will likely focus on Asia in the coming years, although bolt-on purchases seem to be the best way forward for the brewer, according to an analyst.


In a note to clients late last week, Sanford C Bernstein considered four options for Carlsberg's M&A strategy going forward. Bernstein's predictions followed Carlsberg's AGM last week, when chairman Flemming Besenbacher said he hopes the brewer will make “some real strategic acquisitions and mergers”.

The first, and most probable, opportunity is in bolt-on buys, Bernstein said. 

“There are still plenty of in-fill opportunities,” the analyst said. “Carlsberg could add to its recent deal to acquire a majority stake in Chongqing Brewery (in China). It could buy out minorities in its existing operating companies in China. It could build on its JV with Boon Rawd/Singha (in Thailand) and take a direct shareholding. It could further increase its stake in Habeco in Vietnam.”

Earlier this month, Carlsberg said it would launch a “partial takeover offer” for a further 30% of Chongqing after upping its holding to almost 30%. Back in September, the company set up a Thai distribution JV with Singha Corporation. Finally, in November, Carlsberg secured approval to raise its stake in the government-controlled Hanoi Alcohol Beer and Beverage Corporation (Habeco) to 30%.

Less likely options for Carlsberg in the coming months are either a bigger acquisition in China - “We doubt if the Chinese government would ever permit an outright takeover of, say, Beijing Yanjing; certainly not short-medium term” - or a deal with “either of the two large Japanese brewers”, which would have minimal synergies.

The final – and least likely – M&A route for Carlsberg, according to Bernstein, is a tie-up with one of the other three “Big Four” global brewers.

“This would almost certainly entail Carlsberg becoming a minority partner, which in our view would be very difficult to sell in Denmark, even if management agreed,” the analyst said. “Furthermore, a combination with Heineken would throw up way too many competitive conflicts in Europe.

“Anheuser-Busch InBev is a theoretical possibility, but we doubt that A-B InBev wants increased exposure to Western Europe.”

Last year, Carlsberg's CEO, Joergen Buhl Rasmussen, told just-drinks that the company would not look to secure a footprint in the markets of Africa or Latin America. “I don't think we need to go into Africa or Latin America to create the ideal profile for Carlsberg,” he said.

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