Print Page | Close Window

SABMiller PLC - Birra Peroni Transaction

RNS Number:0689L
14 May 2003


London, Johannesburg and Rome, 14 May 2003.  SABMiller plc (SABMiller) and Birra
Peroni S.p.A. (Birra Peroni) have reached an agreement for SABMiller to acquire
a majority interest in Birra Peroni.  SABMiller's initial stake will be between
51% and 60%, with the precise amount to be determined on closing of the
transaction.  Assuming the acquisition of a 60% interest, SABMiller's initial
cash investment will be Euro246 million ($279 million), which is based on a
enterprise value of Euro563 million ($638 million).  SABMiller and the
of Birra Peroni have agreed put and call options, which, when fully exercised,
will result in SABMiller increasing its shareholding in Birra Peroni to between
80% and 100% over a 3 to 5 year period.  The transaction is not subject to any
conditions and closing is expected within three weeks.


  * First significant SABMiller investment in Western Europe through key
Italian market
  * Birra Peroni holds a strong number two position (25.2% share) in the
growing Italian beer market, with 2002 revenues of Euro494m ($560m) and
adjusted EBITDA of Euro44.8m ($50.8m)
  * Leading brand portfolio includes Peroni, the number one beer in Italy, and
Nastro Azzurro, the number three brand in the premium segment
  * Enterprise value per hectolitre Euro128 ($145)
  * Operational synergies and best operating practices result in cost savings
not less than Euro9 million ($10.2m) by the end of the third full financial
  * Good portfolio fit, providing cross-selling opportunities for SABMiller
brands into Italy and Birra Peroni brands into selected SABMiller markets
  * Birra Peroni to be managed as part of SABMiller Europe, where beer volumes
would be 27 million hectolitres representing 21.8% of total SABMiller volume
(based on SABMiller F02 volumes).

Graham Mackay, Chief Executive, commented: "This transaction represents a
further step in developing SABMiller's strategy. Birra Peroni has an outstanding
reputation and heritage, and a leading brand portfolio, including Peroni and
Nastro Azzurro. Italy is one of only two Western European markets to be
experiencing real volume growth, at some 3%, well ahead of the regional trend.

"Our entry into Italy, Europe's seventh largest beer market, combines a leading
in-country position with strong potential for Birra Peroni brands in
international markets.  We also believe that there are opportunities for us to
enhance the value of Birra Peroni through the application of operational and
brand expertise, proven in our other European businesses.

"The acquisition creates cross selling opportunities for us and our new
partners. Italy's strong and growing import market offers potential for Pilsner
Urquell and other SABMiller brands, while Birra Peroni brands will enhance our
global portfolio."

Marco Martinelli, Chairman of Birra Peroni Industriale, said:  "Birra Peroni is
delighted to be joining the SABMiller group, so becoming part of one of the
world's leading brewers. I strongly believe in the exciting growth prospects of
Birra Peroni and of our core brands, Peroni and Nastro Azzurro.  The combination
of Birra Peroni and SABMiller management in Italy will ensure the continued
success and goodwill of the company.

"After five generations, Birra Peroni's resulting widespread ownership is proud
to welcome SABMiller as a strong partner in the next stage in the natural
evolution of Birra Peroni's corporate life."

Acquisition Rationale

Italian Beer Market

Birra Peroni is a strong national business, in a growth market, with potential
for further upside from leveraging the Birra Peroni brands and distribution

With annual sales of 4.4 million hectolitres (hls) in 2002, Birra Peroni has
25.2% of the Italian market, making it the second largest beer producer in the
country by a significant margin.  The top two players have a combined market
share of over 60% of the Italian market.

Italy is a growing beer market, with a current estimated market size of 17m hls.
  Between 1996 and 2001, the market demonstrated a compound annual volume growth
of 3.5%, and an increase in per capita consumption of 21% to 29 litres over the
same period. Despite these increases, Italy's per capita consumption of beer is
still amongst the lowest in Europe at 29 litres per capita versus the European
average of 80 litres. Beer has grown its share of the total Italian alcohol
beverage market from 6% in 1980 to 19% in 2002.

Birra Peroni's brand portfolio includes two of the top six brands in Italy.
Brand Peroni is number one in Italy with a 12.5% share of the market over the
last four years, and is the oldest brand in the country with a history dating
back to 1846.  Nastro Azzurro is amongst the top three premium brands in the
country with a 4.0% share. Birra Peroni brands have established export positions
in the UK, US and Australia.

Brand Fit

By leveraging the strength of Birra Peroni's distribution relationship with
trade channels there will be an opportunity for SABMiller's international brands
to cross sell into Italy in the premium import segment, which has seen growth
from 21% of total beer consumption in 1997 to 25% in 2002. SABMiller believes
that there is an opportunity to grow the Birra Peroni brands in selected
SABMiller markets, in particular the United States.

SABMiller expects that the sharing of knowledge, processes and systems,
particularly in distribution and procurement, will further enhance Birra
Peroni's competitive position.  As a result the transaction returns are expected
to exceed the cost of capital (country WACC 7.5%) in the fourth full financial


Birra Peroni will report to SABMiller Europe MD, Alan Clark, and his existing
senior management team at the Europe hub. Whilst relying on the support and
continuity of existing family shareholders, who will be represented on the Board
of Birra Peroni, SABMiller will appoint the majority of the Board, including the
Chairman (President) and the Managing Director. Existing operational management
will remain in place.

The Transaction

SABMiller is acquiring an initial stake of between 51% and 60% in Birra Peroni.
Assuming a 60% acquisition, SABMiller's initial cash investment will be Euro246m
($279m), valuing 100% of the equity of Birra Peroni at Euro410m ($465m).  The
precise shareholding will be determined on closing of the transaction, depending
upon the level of acceptance of the offer above the agreed 51%.  Taking account
of net debt of Euro153m ($173m) as at 31 December 2002, the enterprise value
of the transaction is Euro563m ($638m). Funding of the transaction will be
existing debt facilities, and it is expected that the acquisition will be
earnings positive in the second full financial year. Based on the total
enterprise value, the earnings before interest, tax, depreciation and
amortisation (EBITDA) multiple is 12.6 and EV/hl of Euro128 ($145).

Subject to the achievement of demanding domestic performance targets in 2003, a
further payment of up to Euro25m ($28m) will be made, pro-rata to all
If these performance targets are met, the effective EV/EBITDA multiple would
fall to 10.6 or less, reflecting the underlying earnings growth.

SABMiller and the remaining Birra Peroni shareholders have entered into put and
call options that, if exercised, will result in SABMiller's ownership increasing
to between 80% and 100% of Birra Peroni between financial years 2005 and 2008.

The price payable under these put and call options is based on an equity value
of Euro410m (for 100% of Birra Peroni) plus earn-out arrangements which are
dependent on the future domestic and international performance of Birra Peroni.
Assuming 40% of the shares are subject to put and call options, the maximum earn
out payable would be Euro40.8m ($46.2m).

For the year ended December 31 2002, Birra Peroni reported revenues of Euro494m
($560m) and achieved sustainable pro forma EBITDA of Euro44.8m ($50.8 m), after
adjusting for non-recurring costs of Euro3m ($3.4m).  As at December 31, 2002,
Birra Peroni had net assets of Euro113m ($128m).


For further information:

Sue Clark
Director of Corporate Affairs,                               44 (0) 20 7659 0191
SABMiller plc                                       Mobile: +44 (0) 7850 285 471

Nick Chaloner
Communications Director,                                    +44 (0) 20 7659 0119
SABMiller plc                                       Mobile: +44 (0) 7880 502 755

Anna Miller Salzman
Head of Investor Relations,                                 +44 (0) 20 7659 0106
SABMiller plc                                       Mobile: +44 (0) 7973 837 070

Philip Gawith
The Maitland Consultancy Limited                             44 (0) 20 7379 5151

This announcement and presentation slides are available on the company website,

A photograph of SABMiller's Chief Executive, Graham Mackay is available from
Briony Gilbert at

Notes for editors:

1. SABMiller plc

SABMiller is one of the world's leading brewers, with pro forma 2001/02 lager
volumes in excess of 120 million hectolitres.  It has 118 brewing operations and
over 64,000 employees, in 24 countries across Africa, Central and Eastern
Europe, North and Central America and Asia. It has a portfolio of strong brands
and leading market shares in many of the countries in which it has brewing
operations.  Outside the USA, SABMiller is one of the largest bottlers of
Coca-Cola products in the world.

SABMiller is listed on the London and Johannesburg stock exchanges and has a
market capitalisation of approximately US$7 billion (R54 billion).

2. SABMiller Europe

SABMiller has a strong position in Central and Eastern Europe with 14 breweries,
total volumes of 22.5m hls (as at 31 March 2002), 9,250 employees and a brand
portfolio that includes some of the leading brands in the region, including
Pilsner Urquell, Tyskie Gronie, and Ursus. Most of these markets will shortly
enjoy the benefits of EU accession and SABMiller has number one or two market
share positions in Canary Islands, Czech Republic, Hungary, Poland, Romania, and
Slovakia, and number five in Russia.

3. Birra Peroni S.p.A.
Birra Peroni S.p.A. boasts a strong heritage dating back to 1846 and is the
second largest brewer in Italy with 25.2% of the market, volumes of 4.4m hls and
a turnover of Euro 494m ($560m) in 2002. Its portfolio of brands includes Peroni
(mainstream) with a leading market share of 12.5% of the Italian beer market
over the last four years, and Nastro Azzurro (premium) with a market share of
4.0%.  Birra Peroni has four breweries in Italy with a combined capacity of
around 5.7m hls and employs 850 people.

In 1999 Birra Peroni added to its existing distribution interests by creating
its own distribution company called SoDiPar. This operation incorporates 48
previously independent distributors into a single entity.

Birra Peroni also has a majority stake in Saplo a malt production company and
owns a chain of Crazy Bull Cafes.

4. Advisors

Citigroup Global Markets acted as financial advisor and Lovells acted as legal
advisor to SABMiller on this transaction.

Lehman Brothers acted as financial advisor and Carnellutti acted as legal
advisor to Birra Peroni.

Note: Exchange rate of  Euro1 = US$1.1332 used.

                      This information is provided by RNS
            The company news service from the London Stock Exchange

(2 of 2)


0706 14 May 03

Share price data provided by vwd group & financial data provided byMorningstar.