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

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

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