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Just how good an idea is it to invest in Colombia? According to South African brewer SABMiller, it’s not such a bad idea at all. The group has just bought Colombian brewing group Bavaria for $7.8bn, and will issue some 225m shares to buy the 72% stake in the group. Bavaria is owned by the Santo Domingo family, who will receive a 15% stake in SABMiller in exchange.
The Bavaria/SAB combination should prove a good one, says Simon Nixon on Breakingviews.com. As it is, Bavaria is already generating strong growth, as first quarter ebitda (earnings before interest, tax, depreciation and amortisation) grew by some 24%. Moreover, SABMiller’s track record at improving the performance of its acquisitions is excellent, and the group is once again convinced that it will be able to deliver even stronger revenue growth. And that’s not surprising: Bavaria has a “strong portfolio” of brands, while its production and distribution system “would be hard to replicate”.
Bavaria’s dominance in its Andean markets is in fact rather similar to SABMiller’s position back in South Africa, says Lex in the FT. Bavaria boasts “sensible pricing, customer segmentation and packaging” which will all go a long way towards boosting per capita consumption. The deal should also place the pressure on rivals InBev and Heineken – while SAB proves that “skill transplants can improve financial health”
Published in News-And-Charts
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Heather D'Alton
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