Interbrew, AmBev to Form Beer Giant

Wednesday, March 3rd 2004, 12:00 am

By: News On 6

BRUSSELS, Belgium (AP) _ Brewing giant Interbrew of Belgium announced plans Wednesday to combine with AmBev of Brazil in a complicated stock deal that the companies valued at about $11.4 billion and would create the world's largest brewer by volume.

The new firm, InterbrewAmbev, would have a global market share of approximately 14 percent with combined revenue of $11.9 billion with brands including Beck's, Stella Artois and Brahma.

Although Interbrew ends up with 57 percent of AmBev, which gets Interbrew's Canadian subsidiary Labatt in return, the companies refused to call it a takeover or even a merger.

``The word 'combination' says it best,'' said Interbrew spokeswoman Marianne Amssoms, noting that the two companies will have four seats each on the new InterbrewAmbev board, alongside six independent directors.

``We'll still end up with two very separate publicly traded companies but where we can look for opportunities to run them together, that's what we'll do,'' Interbrew chief executive John Brock said in remarks released by Interbrew.

Initial reaction was cautious, reflecting the intricate structure of the agreement.

After diving about 5 percent in early trading, Interbrew's share price recovered most of the ground by midday and was down 1.8 percent to 22.59 euros ($28). It had fallen almost 5 percent over the previous two days. AmBev's Brazilian shares fell more than 6 percent Tuesday after rising 4 percent Monday.

``While the deal makes sense in terms of operations,'' giving Interbrew access to the fast-growing Latin American beer market, Degroof analyst Christophe Piron said ``some financial details'' were lacking. KBC's Marc Leemans called the transaction ``complicated.''

Meanwhile, Interbrew released its 2003 results showing global net profits up 8.1 percent to 505 million euros ($617 million). Sales rose 0.7 percent to 7.044 billion euros ($8.604 billion).

The company said growth was led by its Stella Artois lager, with an 8.1 percent volume increase worldwide, and its German beer Beck's, up 5.7 percent.

Interbrew will issue 141.7 million new Interbrew shares for 100 percent of Braco SA, a Brazilian holding company for the current interests of a group of AmBev's controlling shareholders. An offer will be made later for Ambev shares held by the public.

On its part, AmBev will issue 9.5 billion AmBev ordinary shares and 13.8 billion preferred shares to Interbrew and assume debt of $1.5 billion in exchange for the Canadian subsidiary Labatt, including its 30 percent interest in Femsa Cerveza SA de CV and its 70 percent interest in Labatt USA.

Interbrew put the total transaction value for its 57 percent stake in AmBev, excluding debt, at 9.2 billion euros ($11.4 billion).

InterbrewAmBev will be headquartered in Leuven and traded on the Brussels exchange, while AmBev will continue to be a publicly traded company on the Brazilian and the New York stock exchange.

Brock said AmBev will have two co-CEOs _ one for North America, one for South America _ who will report to the AmBev board and to the global board in Belgium. He said he expected the deal to close by the end of the year, pending regulatory approval.

``The combination preserves the best of both companies, while enhancing our profitability and prospects,'' Brock said in the Interbrew statement.

Marcel Herrmann Telles, co-chairman of AmBev, said the prospect of unified operations ``from Canada to Argentina'' was ``very exciting'' for AmBev.

``More broadly, we can now achieve our long-term goal of opening the world's largest markets for AmBev's brands,'' he said in the Interbrew statement.

The linkup creates the largest beer maker in the world by volume, the companies said. It would be No. 2 by revenue behind industry leader, St. Louis-based Anheuser-Busch, which had sales of $14.1 billion in 2003.

AmBev has a presence in every Latin American country except Colombia and Mexico, and it sells two-thirds of the beer in Brazil's massive 2.1 billion gallon market.

Both companies have expanded rapidly through acquisitions in recent years, and Interbrew is keen on winning a bigger foothold in emerging markets where beer consumption is rising.

AmBev _ whose full name is Companhia de Bebidas das Americas, or American Beverage Co. _ was created in 2000 by the merger of Brazilian brewing giants Antarctica Paulista and Brahma.

Interbrew, one of the world's oldest beer companies, sells 200 brands in 120 countries, including Stella Artois, Beck's, Leffe, Bass Ale and Labatt Blue.