This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Heineken Takes a Keg Stand in Beer Wars With $4.1B Tiger Bid (Update 1)

Stocks in this article: BUD TAP

Heineken's offer is "a very full price in our view and may still need to go higher," wrote Jefferies analyst Dirk van Vlaanderen in a note to clients. A bidding war would underscore the thirst for scarce growth assets in emerging markets among beer giants. Still, a successful bid could be positive for Heineken as it takes on ABInBev and SABMiller.

"Strategically we like the deal given the dynamic growth credentials of the Asia Pacific region and that Heineken knows the business well after 80+ years of collaboration," wrote Van Vlaanderen.

However, Davy Research analysts calculate the deal at a high multiple to Asia Pacific Breweries' earnings, estimating the offer at 19 times APB's trailing earnings before interest taxes depreciation and amortization (EBITDA). They also argue that the premium price could reflect APB's importance to Heineken. "While this is certainly at the expensive end of recent brewing acquisitions, APB is a high-growth company and is of significant strategic importance for Heineken," the analysts note.

In late June, Anheuser-Busch InBev (BUD) paid $20.1 billion for its remaining stake in Grupo Modelo, the maker of Corona beer, in a move that further pushes the beer giant into fast growing Central American markets.

In the deal, Anheuser-Busch InBev is tapping beer consumption in Central America and the export of its brands like Corona to international markets. Already, Corona is the most imported beer in the United States and Anheuser-Busch InBev's beer presence stretches from the U.S. to Latin America, Europe and beyond.

Earlier in 2012, Anheuser-Busch InBev bought Cerveceria Nacional Dominicana, the maker of Presidente beer and the largest brewer in the Dominican Republic for $1.24 billion, boosting its beer brands in the region.

After both acquisitions, Anheuser-Busch InBev will own Corona, Pacifico, Brahma, Presidente, Quilmes, and Modelo branded beers in Latin America, putting it in stiff regional competition with Heineken, which owns Dos Equis, Tecate and Sol beers.

AB InBev effectively gained a non- controlling 50% stake in Modelo when InBev bought Anheuser-Busch in 2008 for $52 billion, in the biggest-ever beer merger.

To combat declining sales in key U.S. and Canadian beer markets Molson Coors (TAP) recently acquired Czech Republic-based StarBev, the brewer of Staropramen beer, in a $3.5 billion deal that will push the company into heavy-drinking eastern European emerging economies.

In late 2011, SABMiller (SAB), the world's second-biggest brewer by volume, bought Australia's Fosters Group for about $10.5 billion.

For more on investing in beer and alcohol, see the top 5 beverage stocks. See 5 deal ready stocks loved by hedge funds for more on potential M&A targets.

For a breakdown by Euromonitor of beer growth markets, see the fastest-growing drunk nations.

-- Written by Antoine Gara in New York

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs