Ann Crotty

Not EVEN two weeks into the new year and there is already market speculation about two major corporate deals involving SABMiller.

With the ink barely dry on SABMiller’s acquisition of Australian beer group Foster’s, talk has resurfaced about a possible bid for SABMiller by multinational beer giant Anheuser-Busch InBev (ABInBev).

And in what may, or may not, be a bid to remind the market of just how attractive its emerging assets are, this week SABMiller announced details of a number of organisational changes to the strategic alliance deal with the Castel Group that covers its African operations, excluding South Africa and Namibia.

The key changes to the Castel agreement will see the group’s operations in Nigeria being managed by SABMiller and those in Angola being managed by Castel. Provision has been made for improved sharing of best practice and technical expertise as well.

In terms of the strategic alliance between the two groups, SABMiller holds a 20 percent shareholding in Castel’s African beverage interests and Castel has a 38 percent shareholding in SABMiller’s principal African holding company.

SABMiller chief executive Graham MacKay said the changes would benefit the local businesses and “demonstrates both groups’ long-term commitment to the alliance”.

Castel executive chairman Pierre Castel said: “After 10 years of alliance, it was deemed appropriate to review and upgrade our partnership with a stronger focus on synergies.”

This week’s announcement about the changes to the Castel-SABMiller Africa alliance has sparked a resurgence of speculation that SABMiller will make a bid for Castel. Such a bid has long been regarded as an inevitable and highly attractive transaction for the acquisitive SABMiller.

However, an obstacle to such a transaction seems to be the fact that Pierre Castel, the controlling figure in the Castel family – which owns the group – is believed to be keen to retain control. This means that a transaction could be unlikely while he remains the executive chairman.

SABMiller’s head of media relations, Nigel Fairbrass, told Business Report yesterday: “Given the overlap between the operations we would have an interest in Castel’s share of our strategic alliance.” He then added that the Castel family has given no indication of any desire to sell.

But given Pierre Castel’s age (he is 84) and the fact that Mackay, 63, is due to retire next year, analysts are speculating that further strengthening of the alliance is on the cards over the next 18 months.

Such a transaction would considerably help to enhance SABMiller’s attractiveness as a target for ABInBev.

The 22 million hectolitres that Castel would add to SABMiller’s 265 million hectolitres of capacity comes from highly attractive emerging markets, which are regarded as offering considerably stronger growth prospects than those offered by the developed markets in which ABInBev mainly operates.

The comparatively poor long-term growth prospects facing ABInBev are thought to be behind the continued speculation that the world’s number one beer maker will soon make a bid for SABMiller, the second-biggest-biggest beer producer.

Absa Asset Management Private Clients analyst Chris Gilmour said yesterday that a Castel deal would enhance SABMiller’s attractiveness, and help to bulk up the company.

He referred to SABMiller’s recent “growth by stealth” and noted that if last year’s transaction with Turkey’s Anadolu was included with Foster’s, SABMiller’s capacity was no longer dwarfed by ABInBev’s 350 million hectolitres.