SABMiller Launches Bid to Buy Grolsch for $1.2 Billion

SABMiller, the world's second-biggest brewer, has agreed to buy Dutch rival Grolsch for 816 million euros ($1.2 billion) in cash to strengthen its position in the fast-growing premium beer market.

The deal is the latest sign of consolidation in the global brewing industry, and comes after Britain's Scottish and Newcastle rejected an improved 7.3-billion-pound ($14.9 billion) bid proposal from Denmark's Carlsberg and Dutch group Heineken last week.

London-based SABMiller, which makes Miller Lite, Castle and Peroni beers, said on Monday it was offering 48.25 euros a share, 84 percent above Grolsch's average closing share price over the past month.

Shares in the Dutch company, best known for its Grolsch premium pilsner, were up 76 percent at 47.4 euros. SABMiller shares were down 0.45 percent at 1,338 pence.

SABMiller said it planned to expand the Grolsch brand across Africa and Latin America, where the premium beer market is still in its infancy, and in the more developed markets of central and eastern Europe.

SABMiller Finance Director Malcolm Wyman told reporters the deal would not corset its ability to do more deals, but would not comment on whether SABMiller was interested in getting involved in the bidding for Scottish and Newcastle (S&N).

"We look at all acquisitions and opportunities and if we find them attractive we would become involved. So this deal has no particular bearing on any other deal we may look at."

Wyman added there would be few synergies from the deal.

"It's not cost synergies. The major issue is utilizing the brand over our platform of 60 countries."

Known for its green swing-top bottles, first introduced in 1897, Grolsch currently makes the bulk of its income in the Netherlands. Britain is its second-biggest market.

Knock Out

The offer is endorsed by Grolsch's board and SABMiller has received the backing from the key family shareholders which own 37 percent of the Dutch brewer.

"In financial terms, this is a knock-out position," Grolsch Chief Financial Officer Arjan Kaaks told reporters. "This is way beyond the ordinary transaction that is taking place currently."

Cazenove analyst Matthew Webb said the deal looked a good one for SABMiller, despite the hefty price.

"Although SABMiller is paying a big premium and full multiple for Grolsch, our initial conclusion is that the extent of the medium-term revenue synergies make this an excellent deal," Webb said.

SABMiller is paying generous 14.7 times 2006 reported EBITDA earnings. This compares with similar deals such as SABMiller buying Italy's Peroni in 2003 at 12.6 times, and InBev purchasing Germany's Beck's at 13 times in 2001.

Analysts said Grolsch gives SABMiller a European beer brand of real heritage to compete globally with Heineken. It will help fill a gap in South Africa after the loss in March of SABMiller's license to brew Heineken's Amstel, which will cost it $40-55 million in profits in the year to March 2008.

Petercam analyst Jurgen Smits van Oyen saw little chance of a rival bidder emerging.

"We consider the SABMiller offer very attractive and would not expect any other player to enter the game," he said.

Grolsch Chief Executive Ab Pasman said the company had looked at a number alternatives but he would not reveal details.

Grolsch was founded in 1615 in the town of Grolle, today called Groenlo, close to the German border. It went public in 1984 and is today based in Enschede.