South Africa: SABMiller’s share price jumps on Foster's talk

The share price of SABMiller was up 3.8 % or 4.61 rand in afternoon trade on Monday, March 20 as markets focused on talk that the brewer, one of the world's top three by volume, could be a prime candidate to buy up rival Foster's portfolio of breweries in emerging markets, I-Net Bridge communicated.

As of 3pm local time, SABMiller was quoted on the JSE at 125.47 rand, up from 120.86 rand at Friday's close, with 1.90 million shares having changed hands.

The story that SABMiller and fellow brewer Scottish & Newcastle might be interested in bidding for Foster's overseas breweries first appeared in London's Sunday Telegraph on Sunday.

However, a SABMiller spokesperson told I- Net Bridge on Monday the company could not comment on market speculation.

Key markets

Australia-based Foster's has made it apparent that it is looking to sell its overseas brewery assets, with the intent of outsourcing production while retaining ownership of its brands. These are located in key emerging markets including China, Vietnam, and India where SABMiller already owns breweries.

SABMiller already brews Foster's beer under license in the US. The addition of capacity via a Foster's acquisition could therefore further improve the company's production scales in countries with substantial potential like China and India.

SABMiller CEO Graham Mackay has said repeatedly that these countries offered the group long-term growth potential given their currently low beer consumption per capita. As one industry analyst pointed out, it would therefore be easy to imagine that the group would seriously look to see if the Foster's operations would add value to SABMiller's existing operations.

However, it could be difficult to value the brewery assets on their own without considering the value of the licensing or royalty structures for the Foster's brand as well, the analyst added.

The Foster's assets could also be a logical fit with S&N's business, given that the company already brews Foster's beer under license in the UK and Europe, and also has a presence (albeit smaller than SABMiller's) in emerging markets.

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