Wednesday 24 January 2018

Brazil's 3G said to consider bid for Guinness owner

Diageo shares rose 6.8pc
Diageo shares rose 6.8pc

Martine Geller and Thomas Molloy

Guinness may soon become a Brazilian-owned company, according to media reports in Rio de Janerio.

Shares in Guinness parent Diageo closed up 6.8pc yesterday following a report in the Brazilian press saying private equity firm 3G Capital was considering a bid for it.

Brazilian billionaire Jorge Paulo Lemann and his partners in 3G, Marcel Telles and Carlos Alberto Sicupira, are in the initial stages of studying a buyout offer for Diageo, the Veja newsweekly reported, without saying how it obtained the information.

The three former investment bankers helped build up Anheuser Busch InBev into the world's biggest brewer. They subsequently performed leveraged buyouts of Burger King and Heinz, and are now merging Heinz with Kraft Foods.

But a leveraged buyout of Diageo would be the largest in history and well beyond anything 3G has done, said Jefferies analysts, who estimated that the buyout firm would need to raise $73bn (€65bn) in equity, assuming a 30pc premium to Diageo's stock price and six times leverage.

"What might be more likely is that 3G might be contemplating supporting a move for Diageo by AB InBev, in which Lemann and Telles have substantial stakes," stockbroker Jefferies said, adding that AB InBev might see synergies in selling beer and spirits.

Diageo, the world' biggest spirits company and the maker of Johnnie Walker whisky and Tanqueray gin declined to comment on the Brazilian report, which could not be independently verified.

Belgium-based AB InBev, which was also not immediately available to comment, does frequent acquisitions and has long been rumoured to be eyeing rival brewer SABMiller.

Diageo shares closed up 6.8pc at 1880 pence.

The possible 3G deal is only the latest sign that Brazil is playing an increasingly important role in Irish business life.

The Safra Group, which is owned by the second richest Brazilian, together with the Brazilian Cutrale family torpedoed an attempt by Dublin-based Fyffes to merge with US rival Chiquita following a lengthy battle last summer.

The Brazilian consortium outbid Fyffes and tempted Chiquita shareholders with a firm cash offer rather than a mixture of cash and shares.

Irish Independent

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