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High cost of Sabeco sale good news for Heineken as Anheuser-Busch InBev may exit race - analyst

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A high price and restrictive ownership limits may deter Anheuser-Busch InBev from buying a stake in Saigon Beer Alcohol & Beverage Corp (Sabeco), leaving Vietnam's premium beer market clear for Heineken, an analyst has said.

Heineken may be left with a less crowded premium beer market in Vietnam

Heineken may be left with a less crowded premium beer market in Vietnam

The Vietnamese government this week released details of is upcoming Sabeco sale, setting an initial price of VND320,000 (US$14.10) a share. The price is a near-30% premium on Sabeco's average trading price over the past six months.

A number of multinational brewers, including AB InBev and Japanese brewers Kirin and Ashai, are reportedly keen to buy into Sabeco – Vietnam's biggest brewer - and increase their presence in the fast-growing Vietnamese beer market.

However, in a note today, Bernstein's Trevor Stirling said the initial price represents a relatively high EBITDA multiple of 30-fold, which could "inhibit interest... from the more economically rational". In comparison, Asahi last year paid an estimated 15x EBITDA multiple for SABMiller's European brands Grolsch and Peroni.

Suitors may also be deterred by a limit imposed on how much a company can purchase. The Vietnamese government, which currently owns 90% of Sabeco, will divest a 53.6% stake to investors, however Bernstein cited media reports claiming that foreign-ownership has been limited to 49%.

"Unless a foreign acquirer can achieve effective majority control by partnering with a local investor, which could be tricky to structure, we expect synergies will be minimal," Bernstein said. 

The analyst said it found it "tough to believe" that AB InBev would agree to a deal under these terms, suggesting that the Budweiser owner would exit the race for Sabeco.

Bernstein said this would be good news for Heineken as the Dutch brewer already has a solid presence in Vietnam's premium beer sector and was concerned that the Sabeco sale could intensify competition from AB InBev. Meanwhile, other Sabeco suitors, such as Asahi, Kirin, San Miguel and Thaibev, may be able to afford the high price, but lack a meaningful existing presence in Vietnam and a proven track record of driving margin improvement in their overseas markets, according to Bernstein.

"We think the threat to Heineken is diminished, as Sabeco's approach to competing with Heineken in premium beer is likely to be largely unchanged," Bernstein said.

Vietnam's trade & industry ministry has set an 18 December date for the Sabeco sale.

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