Budweiser joins race for S&N's stake in UB

BANGALORE: Budweiser maker Anheuser-Busch (A-B) may show up at United Breweries (UB) to acquire Scottish & Newcastle (S&N)’s 37.5% stake, which is in play with the latter entering into discussions with Carlsberg and Heineken combine to sell off its worldwide interests. Dutch brewer Heineken has already moved for S&N stake in the Vijay Mallya-led Indian company as a possible carve up of the UK brewer could be achieved in the coming week.

Mr Mallya and UK brewer S&N hold equal 37.5% stake in UB, which accounts for 48% share of India’s rapidly expanding beer consumption with Kingfisher as its flagship brand. The likelihood of an unsolicited bid from A-B, and the other potential suitors like InBev or SABMiller, strengthened with UB stating that it possessed a right of first refusal on S&N stake under certain circumstances.

“We are fully aware of our rights. There is a right of first refusal under certain circumstances, and we are not going to explain in public. It is sufficient to say that we have received approaches from more than one global brewer,” a top UB official told ET.

“We are just listening to them at the moment,” he added when queried whether UB has initiated negotiations with brewers other than Heineken, and if it has reached out to S&N for a buyback. Sources confirmed that A-B was one among the global brewers who have approached UB to explore an entry into the domestic beer giant. But an informed source said:

“It is left to be seen how S&N can cut a deal with UB on the sidelines when they are talking to a global bidders with affirmed interest in India.” When contacted, W Randolph Baker, VP & CFO, Anheuser-Busch, Inc said: “It is our policy not to confirm, deny or speculate on rumours of potential investments, acquisitions, mergers, new business partnerships or other transactions.” While Heineken-Carlsberg combine’s valuation of UB is not yet known, sources said Mr Mallya could start talking to other players if a premium is in sight. Sources believe UB could fetch a valuation of around $2.5 billion in a competitive M&A scenario. This pegs the valuation of S&N stake at around $1 billion. On Friday, UB stock dropped to Rs 327, reflecting a larger meltdown, giving it an estimated mcap of $1.8 billion.

While A-B is widely tipped to an interested player, sources are also betting on interests from Belgian brewer InBev and SABMiller. However, both InBev and SABMiller will have to mull integrating its existing Indian operations before making a serious pitch for UB stake.

Notwithstanding a substantial stake purchase, the entry into UB is going to give the successful bidder any significant management role. For SABMiller, the arch rival of UB on the domestic turf, there are others issues like monopoly charges to worry about.

A-B has a limited joint venture with Hyderabad-based Crown Beers at the moment, and if sources are to be believed, the present arrangement does not tie down the US brewer from exploring other options to expand business in India. Hence, it could show up as a stakeholder in UB independent of the existing JV, unlike in the case of InBev, which needs to carry the local partner Ravi Jaipuria in all the domestic ventures.