SABMiller in rumoured acquisition of FEMSA
The move would drive growth but would also place the brewer in direct competition with AmBev in Brazil and Mexico
However, an acquisition of FEMSA would place SABMiller squarely against AmBev (67% market share) in Brazil and Grupo Modelo (55% market share) in Mexico, both of which have large ownership stakes by A-B InBev. This would put SABMiller head-to-head with its chief rival, especially in Brazil where AmBev is a fierce competitor. Above all, we are watching closely to see if SABMiller overpays. At the rumored $9 billion, SABMiller would be buying FEMSA's beer business at about 12.5 times trailing-12-month earnings before interest, taxes, depreciation, and amortisation. We think this is a fair multiple, but with brewer Heineken also rumoured to be in the running for FEMSA, there is a possibility of a bidding war. We would probably lower our fair value estimate at anything above 14 times, as we believe that would likely destroy value for SABMiller shareholders.
Ann Gilpin is a Morningstar stock analyst based in the United States.