SABMiller to Acquire Stake in Brewer Bavaria

SABMiller said Tuesday that it was acquiring a controlling stake in Bavaria, South America’s second-largest brewer, in a deal valued at about $5.6 billion.

The acquisition gives the London-based maker of Miller beer a major footprint in Latin America, a key growth area and an important market for it to compete with InBev, the world’s biggest brewer by volume.

“We are excited by the enhanced prospects for growth in a strategically important market,” SABMiller Chief Executive Graham Mackay said.

SABMiller said it was buying a 72% stake in Bavaria from Santo Domingo Group for $3.5 billion. Santo Domingo Group is taking a 15.1% stake in SABMiller, the world’s third-biggest brewer after Anheuser-Busch Cos.

Brewers seeing sluggish sales in Western Europe and the U.S. are expanding operations in markets such as China, the new members of the European Union and Latin America.

Bavaria controls 99% of the beer market in Colombia and Peru, 93% in Ecuador and 79% in Panama. Brands include Aguila, Cristal, Pilsener and Atlas.

Shares of SABMiller jumped 10.6% in London trading.

“Clearly, Latin America is a growth market as far as beer volumes are concerned, and this deal completes SABMiller’s geographical representation of global beer markets,” Barclays analyst David Liston said.

SABMiller expects to save $120 million in annual costs from the deal within five years.

Volumes of beer sold in the Andean region of South America are expected to grow annually at a compound rate of 4% over five years, in contrast to just 2% across the global beer industry as a whole.

InBev, whose flagship brands are Brazil’s Brahma, Belgium’s Stella Artois and Germany’s Beck’s, this week reported a 5.4% growth in volume sales in the first half of 2005.