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Post date: 03/03/2016 - 18:31

Heineken can face the music with Molson Coors takeover - Analysis

The first round of musical chairs sparked by Anheuser-Busch InBev's takeover of SABMiller is nearing its end. In the four months since the deal was first announced, AB InBev has hived off the MillerCoors stake to Molson Coors, promised the Grolsch and Peroni brands to Asahai and, this week, agreed to sell SABMiller's interest in Chinese beer Snow to China Resources Beer. All that is left is South Africa, where regulators may take as long as the next 18 months to grant approval to the takeover.

The first round of musical chairs sparked by Anheuser-Busch InBev's takeover of SABMiller is nearing its end. In the four months since the deal was first announced, AB InBev has hived off the MillerCoors stake to Molson Coors, promised the Grolsch and Peroni brands to Asahai and, this week, agreed to sell SABMiller's interest in Chinese beer Snow to China Resources Beer. All that is left is South Africa, where regulators may take as long as the next 18 months to grant approval to the takeover.

Now is a good time, then, to look at the new world beverage map and ask what further changes might lie in store. Now that the initial rounds are almost over, will there be a secondary set of fun and games as the ever-acquisitive global drinks industry looks to fill newly-minted gaps? Analysts at SIG say yes, suggesting that Heineken is well-poised to make a bid for Molson Coors.

The Dutch brewer will jump up from third to second in the global beer world, once SABMiller is subsumed into AB InBev. But, the gap between it and the top will have widened considerably. SIG says that a successful takeover of Molson Coors would bring Heineken's global volumes from 18bn litres to 28bn - still short of AB InBev's post-SABMiller volumes of 57bn litres, but certainly a short-term improvement.

For Heineken, a takeover would be of main benefit in the US, where it lacks the distribution clout enjoyed by AB InBev. Molson Coors owns Coors Light, the US's second-biggest beer brand, and as such could help Heineken get its Mexican beer brand Tecate into more markets, SIG says. At the same time, Heineken's premium portfolio could balance Molson Coors' value-heavy offerings in the US and narrow the value gap with AB InBev, the analysts say.

Elsewhere, a tie-up would help Molson Coors get its brands into Eastern Europe, where Heineken already has a substantial presence. The same would hold true in Latin America and Asia, although the companies' combined footprints in Western Europe could lead to regulatory issues, SIG says.

So, how much would a deal cost? According to SIG, Heineken would pay about US$23bn for Molson Coors, a price tag the analysts say is "manageable". Any deal would probably also see the Molson and Coors families take a stake in Heineken.

The question is, however, does Heineken have the appetite for such a deal? In November, management said it was in no mood to buy more craft brewers after acquiring a 50% stake in Lagunitas Brewing Co. Molson Coors, however, is no bolt-on acquisition and, with AB InBev well on its way to swallowing SABMiller, Heineken is under pressure to grab a seat at the global beer table - before the music stops.