(The following statement was released by the rating agency)
MILAN/LONDON, January 23 (Fitch) The recent acquisitions of Beam
Brewery leave room for further drinks sector M&A in Asia, Africa
Americas, but acquisition prospects in Europe are limited, Fitch
Ratings says. A
combination of good cash flow, lower organic growth and improved
headroom for some drinks companies will make acquisitions
attractive, after a
lull last year.
Carlsberg and SABMiller have the most flexibility for deals at
rating among potential buyers in the beer industry. A recent
modification to the
Carlsberg Foundationâ€™s statute will also make it easier for
Carlsberg to make
acquisitions that dilute the instituteâ€™s shareholding.
Anheuser Busch InBevâ€™s
deal to reacquire Oriental Brewery leaves it with less headroom.
We highlighted the potential for ABI to buy back Oriental in our
Outlook Report for the sector. We see the most likely remaining
targets among brewers as San Miguel Brewery, where 48% holder
Kirin could be a
potential buyer of the remaining half of the business, and
Unidas (33% Heineken).
More generally, Asia and Africa remain likely regions for
further M&A because of
the combination of a fragmented beer market and the potential
for good growth in
volume and prices. China, Korea, Vietnam and Thailand in
opportunities to acquire independent operators.
We believe stagnating demand and the already high level of
Europe will limit opportunities for acquiring local assets.
producing exported drinks (eg whisky and cognac) remain
attractive. The craft,
cider and imported beer segments are growing strongly in the US,
valuation of larger craft brewer Boston Beer Co. is very high
and major brewers
could face competition hurdles if they were to target the
In the spirits sector, Diageo and Brown Forman have the most
acquisitions at their current rating. We believe United
Spiritsâ€™ Whyte & Mackay
unit is also one of the most likely acquisition targets as
may force its sale after Diageoâ€™s acquisition of United
regulators probably would not allow Pernod Ricard to buy Whyte &
Mackay, but it
is likely to be an attractive target for any company looking to
enter the scotch
Our Outlook Report also highlighted Beam as a potential takeover
target in 2014
thanks to its portfolio of bourbon and tequila brands. The
last week that it would be acquired by Suntory.
One likely impediment to deals across the drinks sector is that
Beam acquisition virtually all the potential targets in either
spirits or beer
have a single major shareholder. This is generally either a
or a private equity investor, who either may not want to sell at
all, or may
demand a high price.
Our report â€œ2014 Outlook: EMEA and US Drinks Companiesâ€�
lists several other
potential takeover targets and discusses rating headroom of
participants. It is available from www.fitchratings.com.
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Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
The above article originally appeared as a post on the Fitch
Wire credit market
commentary page. The original article can be accessed at
All opinions expressed are those of Fitch Ratings.
Applicable Criteria and Related Research:
2014 Outlook: EMEA and US Drinks Companies
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