Beer firms Interbrew, AmBev merge
$11.5b plan creates world's top brewer
BRUSSELS/SAO PAULO -- Belgium's Interbrew agreed yesterday to buy a majority stake in Brazil's AmBev in a 9.2 billion euro ($11.5 billion) deal to create the world's biggest brewer by volume, surpassing rival Anheuser-Busch .
Interbrew chief executive John Brock, who took the helm of Interbrew one year ago, said the brewer of Stella Artois and Rolling Rock would end up with a 57 percent stake in AmBev, the maker of Brahma beer.
The new group, which will produce 15 percent of the world's beer, will be called InterbrewAmBev, or InterBev for short.
AmBev chief executive Carlos Brito said at a news conference in Sao Paulo that Interbrew's founding families and AmBev's controlling shareholders would operate the new company under a 20-year co-management deal.
Anxious to avoid any negative implications that could accompany a sale, AmBev officials declined to characterize the complex deal as anything other than an "alliance" or share swap.
Under discussion since October, the deal will give Interbrew access to the quick-growing South American market, where AmBev is the dominant player. AmBev will, in turn, absorb Interbrew's North American operations and launch its brands globally.
"The alliance . . . will have operations in 32 countries, 70,000 employees, and about $11 billion in annual sales," said AmBev's co-president of the board, Victorio De Marchi.
The deal includes the issue of about 3.3 billion euros of Interbrew shares to the controlling shareholders, a cash tender offer to AmBev minority common shareholders for 1.2 billion euros, and AmBev's taking over Interbrew's North American assets valued at 4.6 billion euros.
AmBev said it expects the entire deal to be completed in six to eight months and that it did not foresee any problems with regulators. AmBev's main competitor, local brewer Schincariol, said the deal would hurt competition.
Interbrew shares closed up 2.61 percent at 23.60 euros after earlier falling as much as 6.1 percent. But the shares are still down for the week on concerns that Interbrew might be paying too much for Brazil's largest brewer.
AmBev's voting shares jumped as much as 9.2 percent before closing 8 percent higher at 939.99 reais in Sao Paulo. But the preferred shares not included in the transaction fell as much as 17 percent before closing down 14.96 percent at 647.99 reais.
Analysts said minority shareholders are worried their investment will be diluted by the new shares that will be issued to Interbrew.
"But I think that reading may be wrong," said Sergio Goldman, head of research at Unibanco Asset Management in Sao Paulo. "In the long term this is going to create synergies that will make up for the impact of issuing new shares."
Brock said Interbrew was paying 10.3 times AmBev's 2004 expected earnings before interest, tax, depreciation and amortization, which he believed typical for acquisitions of Latin American brewers.
AmBev will continue with separate stock listings in Brazil and the United States and take over Interbrew's North American assets -- Canada's Labatt, control of the Labatt USA unit, and Interbrew's 30 percent stake in Mexican brewer Femsa .
Interbrew will issue shares to gain a 21.8 percent stake in AmBev from the controlling shareholders and then launch a tender offer to minority shareholders, paying 80 percent of the price in the share issue, to reach 57.5 percent.
When the deal is complete, Interbrew's three controlling families will end up with 50 percent of InterBev and AmBev's controlling shareholders -- Jorge Paulo Lemann, Marcel Telles, and Carlos Alberto da Veiga Sicupira -- with 25 percent.
Four of InterBev's board members will be appointed by Interbrew families, four by AmBev, and six will be independent.
Interbrew's Brock, who will become chief executive of InterBev, said the deal would bring cost savings of 280 million euros a year and that it would boost earnings from 2006.
"We believe there are significant cost saving opportunities in areas from procurement to headquarters, to [information technology], to manufacturing," Brock said. 