Has Efes run out of steam in M&A activity?
Efes Beer Group reported on 8 November 2010 that during the nine months of 2010 (ended 30 September 2010) its sales volume reached 19 million hl beer – up 8.8 percent on the same period a year ago. While the sales volume in Turkey’s beer operations declined by 2.6 percent, beer sales in the rest of the group were up 15.9 percent.
Financial results were mixed. Generally speaking, the rest of the group outperformed Turkey’s beer operations. Net sales in Turkey declined 2.9 percent to TRL 982.7 million (EUR 500.2 million). In the other territories they were USD 776.0 million (EUR 570.3 million), a rise of 15 percent over 2009.
EBITDA in Turkey was TRL 404.2 million (EUR 205.5 million), down 5.7 percent. The rest of the group registered an EBITDA of USD 174.5 million (EUR 128.2 million), up 19 percent over last year.
Comparing EBITDA margin, though, Turkey’s stood at 41 percent, while non-Turkey’s was 22.5 percent, a slight rise from 21.8 percent in 2009.
Efes said that it has more than covered the most recent excise tax hike of 26 percent in Turkey effective as of 28 October 2010 through an average price increase of 17 percent.
Like Carlsberg, it weathered this year’s 200 percent tax hike in Russia by raising prices. Efes implemented a 25 percent price increase in several steps, thereby fully covering the tax increase, the brewer said.
What makes Efes Beer Group an attractive takeover target is that it sells most of its beer in only two markets: Turkey and Russia. Efes’s biggest market is Russia (9.6 million hl beer for the nine months of 2010) followed by Turkey at 6.5 million hl. Market share in Turkey was 88.6 percent and 10 percent in Russia.
In June, Anadolu Efes took full control of its international beer arm, Efes Breweries International (EBI), buying back all remaining shares in EBI. EBI was first listed on the London Stock Exchange in 2004 and many analysts view the delisting as another step towards a possible sale.
Analysts estimate the value of Efes beer at USD 4.8 billion (EUR 3.5 billion).
In mergers & acquisitions track-record terms, after a string of acquisitions and joint ventures in the early 2000s, Efes seems to have run out of steam. It exited the Romanian market in 2006, by selling its 50 percent joint venture stake to its partner in that country, InBev.
Then in early 2008 it formed a joint venture with Heineken for entering the attractive Uzbek market, and for combining existing operations in Kazakhstan and Serbia, thus signalling that it doesn’t have the nerve or wherewithal to tackle those markets alone.
In parallel, the most recent acquisitions made by Efes have been modest. Its purchase of Lomisi, market leader in Georgia, in early 2008 appears impressive, but that brewer only has capacity of about 0.5 million hl beer. Later in 2008, Efes bought the Tekel beer brand in Turkey, for the princely sum of EUR 2.5 million.
Many analysts think that Efes beer has reached a limit on what it can do by itself, and that Anadolu should sell it while it’s still enjoying a high growth rate.
But who could be the buyer? And will Efes sell?
