Thursday, October 20, 2011

Alcohol, Billion Dollar Dealmaking and Muslim Turkey

Two major deals by alcoholic drink giants made some of the highest profile deals in Turkey, a country predominantly muslim with a stable, mature, western democracy. At the end of February, Diageo’s acquisition of Turkey’s Mey Içki for $2.1 billion was not a real surprise, as nascent talks were first reported back in December last year.

 But SABMiller’s play Wednesday morning for its Turkish adventure was not so well tracked. Still, the rationale is the same and that rationale is compelling—access to booming economies and fast-growing markets without paying for anyhting.

According to Wall-Street Journal, the London-based global brewing giant, maker of Grolsch, Peroni Nastro Azzuro and Miller Lite, announced a strategic alliance with Turkish peer Anadolu Efes, allowing the two companies to push further into Turkey, Russia, Central Asia and the Middle East.

It is understood that Anadolu Efes was also weighing up striking a partnership with rival Heineken as a platform for reciprocal growth in Russia, but in the end plumped for SABMiller as the advantages fit better with the brewer’s ambitions.

Taking a 24% stake in Anadolu Efes, SABMiller will transfer its Russian and Ukrainian beer businesses, with an equity and debt value of $1.9 billion, to the Turkish company in return. The Anadolu Group will control 42.8% of Anadolu Efes’s enlarged share capital.

The deal will allow Anadolu Efes to leverage SABMiller’s logistical expertise to distribute its portfolio of brands across the region, while SAB can in turn use the Turkish group’s dominance in the local markets to grow its international brands.

Anadolu Efes will have an 89% share of the Turkish beer market and occupy a number two market position in value terms in Russia, with a valuable portfolio of brands across key market segments.
Turkey is one of the world’s high growth economies with a population of 74 million people, while the company’s products overall reach more than 600 million consumers across the region.

It has also leading market positions in the growth beer markets of Kazakhstan, Moldova and Georgia.
As ever, the commercial benefits are key. The companies say the transaction is expected to be earnings per share enhancing for both groups in the first full year following completion, which is expected at the end of the year.

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