EGYPT: Heineken makes bid for ABC

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Dutch brewing force, Heineken, has made a £287m bid for the Egyptian brewer and drinks company, Al Ahram Beverages Co., known as ABC. The offer, which has the full backing of the ABC board, is equivalent to $14 a share.

ABC, which is listed on both the Cairo and London Stock Exchanges, had a net profit of $22.8m in 2001 on sales of $105m. In addition to beer production in the region of 430,000 hls annually, ABC is also involved in the wine, soft drinks and non-alcoholic malt beverage sectors. According to Heineken, its wineries, producing the Gianaclis and Oblisque brands, account for 85% of the domestic market.

Beer production accounted for 52% of the company's sales in 2001, while non-alcoholic malt beverages represented 29%. Some 11% of turnover came from spirits and 8% from soft drinks.

Heineken said it does not intend to sell off ABC's non-brewing activities of ABC. "It's profitable and it's good for our distribution network there," said Heineken spokesman, Albert Holtzappel. Holtzappel added that the company sees good regional export potential for ABC's malt beverage brand, Fayrouz. It said it would continue to export Heineken beer to Egypt.

The Dutch group said the acquisition would contribute immediately to its net profit. The cash offer, which is at a 27.3% premium on Wednesday's closing price for ABC of $11 a share, is conditional on Heineken gaining at least 76% of the shares.

"This acquisition will provide Heineken with a virtual monopoly position in Egypt," said Stuart Price, beverage analyst with WestLB Panmure. "The bid values Al Ahram at around 7.3x 2003 EV/EBITDA which appears to be a reasonable price.

"However, our concerns about Heineken are centred on the slowing topline and EPS growth. In our opinion it needs to deliver a substantial deal in order to remedy the situation, this deal is relatively insignificant in the bigger scheme of things."

Companies: Heineken

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