Merger unlikely to cause hangover for Turkey’s Efes, other European brewers

MILAN

Anheuser-Busch In Bev SA/NV’s merger with SABMiller Plc is unlikely to alter the competitive landscape of the European beer market over the next 12-24 months, as it will take time for the combined entity to hit its stride, Moody’s Investors Service said in a special report published on Feb. 2. 

Although an ABI-SAB combination would result in significant shifts in market share in the U.K., Italy and the Netherlands, ABI plans to sell most of SABMiller’s assets in these countries, and there is limited overlap in other European beer markets, according to the report. 

“We don’t expect potential changes to competition to have much of a credit impact on Carlsberg and Heineken in the next 12-24 months, given the time it will take to close the ABI-SAB transaction, extract synergies and improve profitability in Europe, and to fully integrate SABMiller’s assets into those of ABI,” said Paolo Leschiutta, a Moody’s Vice President, Senior Credit Officer and author of the report.

While the larger combined ABI-SAB entity will probably grow more rapidly than its peers post-2017, this growth will mainly be outside of Europe and the combined entity will generate only 9 percent of its total EBITDA in Europe following the planned sell-off of SABMiller assets in the U.K., the Netherlands and Italy to satisfy antitrust requirements, said the report.

Heineken N.V., which has the leading position in most of these markets, would be the most affected if the assets were not sold, but its leadership in the higher margin premium segment, particularly in the U.K. and Italy, provides a degree of protection, it added. 

European-rated brewers are unlikely to bid for divested ABI-SAB assets, even if they are a good strategic fit. 

“We do not expect that the ABI-SAB merger will affect Carlsberg’s market leadership in Russia, because SABMiller sold all of its Russian operations to Efes in 2012 in exchange for a 24 percent stake in the Turkish beer producer. Although the stake in Efes might move to ABI, this would not change the existing market positions. In addition, Carlsberg is a strong market leader being larger than the number two, three and four players combined,” said the report. 

Carlsberg Breweries and Turkey’s Anadolu Efes’ ratings would be at risk of downgrade if they made debt-funded acquisitions because their leverage is already high for their current ratings, it warned. 

“Heineken, on the other hand, has the financial flexibility but would face antitrust issues if it were to acquire these assets,” said the report.