Anheuser-Busch InBev NV, Market Cap (as of 19/09/2014): Market Cap €143bn

SABMiller PLC, Market Cap (as of 19/09/2014): Market Cap €73bn

Heineken NV, Market Cap (as of 19/09/2014): Market €34bn

Beer brewing was historically a local business, with only few brands having a global presence in the estimated $600bn market. Since 1998, when the top ten brewers accounted for 34% of the world’s barrel, the concentration has grown up to 65% in 2014 (concentration ratio C4=48%). The consolidation trend swept globally with the top three leaders (AB InBev , SABMiller and Heineken) capturing an increasing share by acquiring smaller competitors. In recent highlight of the consolidation trend, SABMiller has approached Heineken with an offer to buy the Dutch brewing company in order to defend itself against a possible takeover from its largest competitor Anheuser-Bursch InBev. The size of the bid for Heineken is not disclosed, however it could have been one of the largest deals in the industry, since the stock market value of the target is around €34bn.

Indeed, Heineken represents an interesting target: besides being the largest player in the mature market of Western Europe, it has also expanded steadily in fast-growing emerging markets like Mexico and Asia. However, the Heineken family, which owns a controlling stake of just over 50% of Heineken brewery, has rejected the offer to merge with the world second largest beer producer SAB Miller. The founding family is unwilling to lose the control of Heineken Group and as the company states in its official announcement: “The Heineken family has informed SABMiller, Heineken and Heineken Holding of its intention to preserve the heritage and identity of Heineken as an independent company. The Heineken family and Heineken’s management are confident that the company will continue to deliver growth and shareholder value.”

Given the fact that Heineken has declined the offer from SABMiller, it is now more likely that SABMiller itself is going to be a target in acquisition plans of another beer giant, AB Inbev, as analysts say. The motives for consolidation in the industry are strong. Brewers all over the world are looking to cut costs to overcome sluggish consumer-spending growth and change of drinking preferences in favor of wine and spirits.

InBev, strong of its successful cost cutting ability proved in the Anheuser-Bursch acquisition, is looking to seize the opportunity and acquire its closest rival. This time, however, even if the anti-trust hurdles are cleared, repeating the success will be harder with the tightly managed SABMiller. Yet, given the situation on the market, InBev has only two options: distributing cash to shareholders or acquire. The emerging markets will eventually rebound, and the 70% of SABMiller sales in those markets look like a good bet.

To conclude, it is probable that a large acquisition is about to happen even without Heineken.

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