This is from today's Wall Street Journal. Can you imagine something like this happening even one or two years ago?
Time to buy Colombian stocks/real estate?
SABMiller to Acquire
Colombian Brewer
For $3.5 Billion in Stock
By DAN BILEFSKY and JASON SINGER
Staff Reporters of THE WALL STREET JOURNAL
July 19, 2005
SABMiller PLC Tuesday announced a deal to acquire control of Colombian brewer Grupo Empresarial Bavaria, South America's second-biggest beer producer, a move that would help it secure a foothold in the fast-growing South American beer market.
SABMiller said it will buy a 72% stake in Bavaria for $3.5 billion in stock from Santo Domingo Group in a transaction that will result in the Santo Domingo holding 15% of SABMiller. The U.K.-based beer giant, whose brands include Miller, Pilsner Urquell and Castle, a South African brew, would also assume Bavaria's debt, totaling about $2.3 billion.
The deal would make the family that controls Bavaria among the largest shareholders in SABMiller. Altria Group Inc. would still be the largest shareholder in SABMiller with 26% of the company.
The combined business would have total revenue of about $12.5 billion, SABMiller said. SABMiller said it intends to reduce Bavaria's operating costs and invest in the development of a portfolio of distinct and differentiated brands to drive revenue growth. The company estimates that annual cost savings will reach $120 million by March 2010.
For SAB, the deal marks the culmination of a yearlong effort to break into South America, where rivals InBev and Heineken NV already have significant investments.
Founded in 1889, Bavaria is controlled by Colombian billionaire Julio Santo Domingo. The brewer is considered the most attractive of the remaining beer assets in the region, with leading market positions in Colombia, Ecuador, Panama and Peru. Its brands -- Aguila, Cristal, Pilsener and Atlas -- have global export potential and could help SAB offset sluggish growth in western Europe and North America. Bavaria's total sales last year topped $1.9 billion, up 13.2% from 2003. While brewers are struggling to make profits in China, where profit per gallon is about 4 cents, the profit per gallon in South America is about 60 cents.
People familiar with the situation said SABMiller outmaneuvered Heineken in the talks because the Santo Domingo family had been attracted by SAB's experience in other emerging markets such as Eastern Europe, South Africa and Central America. SAB also was willing to structure the deal in a way that appealed to Santo Domingo, which wants to retain some control over a combined group, these people said.
The SAB-Bavaria tie-up faces some big challenges. While it would help SAB take on its rival InBev, the No. 1 brewer in Latin America, catching up to InBev won't be easy. InBev, created when Belgium's Interbrew merged with Brazil's Companhia de Bebidas das Americas, or AmBev, in 2004, dominates Latin America through a stronghold in Brazil, selling 70 million hectoliters of beer annually in Latin America compared with Bavaria's 30 million hectoliters. Meanwhile, InBev already has a huge distribution network in South America and has been expanding into Bavaria's main markets in recent months.
Analysts also warned that a deal could prove risky since a sizable chunk of Bavaria's business is in socially tense Colombia. There also is little geographic overlap between the two groups, making it difficult for SABMiller to squeeze synergies.
Under the deal, Santo Domingo will nominate two directors to SABMiller's board. In addition, Alejandro Santo Domingo and Carlos Alejandro Perez, members of the executive committee of Bavaria's board, will serve as vice chairmen of a newly created board that will have oversight of SABMiller's operations in Latin America.
