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Miller Brewing Co. will be sold for $5.6 billion to South African Breweries PLC
Milwaukee Journal Sentinel ^ | May 30, 2002 | TOM DAYKIN

Posted on 05/30/2002 12:25:22 AM PDT by HAL9000

Miller will be sold for $5.6 billion

Deal with South African Breweries keeps corporate headquarters here

Miller Brewing Co. is being sold to South African Breweries PLC for $5.6 billion, a deal to be announced Thursday that gives the Milwaukee-based brewer a new owner, a new name and a sharper focus on selling beer.

The combined company will be renamed SABMiller PLC after the sale is final, which is expected to occur by July.

London-based South African Breweries will keep Miller's corporate headquarters, with its 1,010 employees, in Milwaukee, said Miller President and Chief Executive Officer John Bowlin. The company also plans to continue operating Miller's seven U.S. breweries, including the Milwaukee facility, which has an additional 940 employees.

"For Miller, for the most part, it's going to be business as usual," Bowlin said in an interview.

South African Breweries is buying a 64% stake in Miller, the nation's second-largest brewer, for $2 billion in assumed debt and $3.6 billion in stock. Miller's current owner, New York-based cigarette-maker Philip Morris Cos., will initially keep a 36% stake in Miller. Philip Morris plans to be a long-term shareholder in SABMiller and has agreed not to sell any remaining shares until June 2005.

Bowlin will be responsible for SABMiller's operations in North America and South America, and he will remain in Milwaukee, along with other Miller executives. Bowlin will report to Graham Mackay, chief executive officer of South African Breweries.

However, Bowlin said, the combined company - which will be the world's second-largest brewer, with an estimated annual sales volume of 102 million barrels and revenue of $9.3 billion - is expected to bring a sharper strategic focus to Miller, which now accounts for only about 5% of Philip Morris' profits.

"We are going to go from being a small part of a huge consumer packaged goods company to being a key component in the world's second-largest brewer," Bowlin said.

"We are going to be a company that's totally focused on brewing, marketing and selling beer."

He said the deal's benefits would include combining the best operating practices of both Miller and South African Breweries, the latter of which is considered by some industry observers to be the most efficient brewer in the world.

Bowlin said he expected the merger to help Miller improve its sales execution, an area where some industry observers have said Miller needs to do a much better job. Bowlin noted that South African Breweries has extensive operations throughout the world, including in such difficult markets as China.

"These guys have succeeded in every country they've gone into," Bowlin said.

On a short-term basis, Miller expects to see an immediate benefit by bringing Pilsner Urquell, one of South African Breweries' better-known brands, into its U.S. distribution system. Bowlin said Pilsner Urquell, a Czech beer, would complement Miller's current main import, Foster's Lager, an Australian brand.

Also, Bowlin expects SABMiller to spur increased overseas sales of Miller Genuine Draft, Miller's main exported brand.

For South African Breweries, the deal provides a major operation in the United States, the world's most profitable beer market. It allows the company to build a global scale and diverse earnings base in competing with other consolidating international brewers, such as Belgium-based Interbrew NV and Holland-based Heineken NV.

It also greatly reduces the company's dependency on earnings made in the rand, the weak South African currency.

South African Breweries has grown rapidly beyond its African base by acquiring breweries in Eastern Europe, Asia and Central America over the past five years. As a result, South African Breweries is the world's largest brewer in developing markets.

However, South African Breweries, the world's fourth-largest brewer, has a share of less than 0.1% in the United States, a country that drinks more beer than any other nation.

Miller's U.S. market share at the end of 2001 was 19.6%, according to trade publication Beer Marketer's Insights.

Miller's market share has been eroding since 1994, and it is well behind archrival Anheuser-Busch Inc.'s 48.6% share.

Some beer industry analysts, anticipating Miller's sale, have said the company will benefit from increased marketing support that South African Breweries might provide.

Miller's fundamental problem, industry consultant Mark Rodman said last week, is that it continues to be outspent in marketing by Anheuser-Busch, maker of Budweiser and Bud Light. Miller has not been adequately funded by Philip Morris over the past several years to meet that competition, said Rodman, who operates Beverage Distribution Consultants, based in Swampscott, Mass.

Miller spent $239 million on advertising in 2001, according to estimates compiled by Competitive Media Reports and published in Beer Marketer's Insights. That compares with $191 million in 2000 and $164 million in 1999, but it is below the high-water mark of $262 million in 1997.

Meanwhile, Anheuser-Busch spent $328 million in 2001, compared with $353 million in 2000 and $317 million in 1999.

Bowlin, however, said Miller had been adequately funded by Philip Morris, and he expects South African Breweries to provide the proper level of marketing support.

"I believe whatever dollars we deem necessary we will get," Bowlin said.

South African Breweries is a much larger employer than Miller, with a global work force of about 40,000, compared with just over 6,550 employees at Miller.

That higher employment number is tied to South African Breweries' higher production. The company sells about 60 million barrels of beer a year, compared with 42.4 million barrels sold by Miller.

Also, South African Breweries' presence in China is largely through joint ventures. Many of those Chinese breweries have relatively high employment numbers, which South African Breweries has been unable to reduce because it doesn't have full control of those operations.

However, South African Breweries has taken steps to trim its global work force in recent years in an effort to operate more efficiently.

During its fiscal year that ended in March 2001, 2,359 jobs were eliminated, including 1,721 through layoffs, with 533 positions cut through early retirement. Another 105 jobs were outsourced to other employers, according to a company report.

"While such retrenchment is always regrettable, it is essential to maintaining business competitiveness and ultimately preserves many more jobs in the company," according to the report, available at www.sabplc.com.

Throughout the '90s, South African Breweries underwent a drastic restructuring and modernization program, according to a labor group that follows the global brewing industry.

The program "tremendously increased productive efficiency of its South African breweries at the expense of jobs," according to a memo issued last month by the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations, a labor group based in Switzerland.

South African Breweries was called "probably the world's most efficient brewer" in a report on the global brewing industry issued two years ago by Lehman Brothers investment bank.

An example of the company's vaunted efficiency is its Ibhayi brewery, which opened in March 2001 in South Africa. The $90 million brewery can produce 1.9 million barrels a year with just 13 employees on each shift, according to the company.

Miller's smallest brewery, at Tumwater, Wash., can produce 3 million barrels a year and has 410 employees. That brewery, formerly owned by Pabst Brewing Co., is much older than the Ibhayi facility.

Bowlin said he doesn't expect any efficiency gains at Miller to result in layoffs.

While there's room for improvement, he said Miller already operates efficiently. Bowlin said the company's combined seven breweries are running at 95% of their total capacity.

Community support

Like Miller, South African Breweries has been heavily involved in the communities where it operates.

South African Breweries provided 1.4% of its annual pretax profits to charitable and community organizations during its fiscal year that ended in March 2001, according to a company report.

That amounted to $9 million, which the company refers to as its "corporate social investment."

About 26% of the social investment was spent on education, such as building new classrooms and renovating the water system at two schools in Zambia. Another 33% was spent on general community welfare programs, including support for helping rural women in South Africa establish their own businesses.

The company also supports environmental, health and cultural activities.

South African Breweries also has focused heavily on battling AIDS, a disease that has devastated the African continent.

Miller has long been active in the communities where it does business. But the company does not provide a breakdown of its spending on such efforts.

Among other things, the company helped finance the development of Miller Park by agreeing to pay $41 million over 20 years for naming rights to the stadium. And Miller Brewing has been a fixture at Summerfest, State Fair and dozens of other community events throughout Wisconsin.

Perhaps the company's best-known charitable effort has been its sponsorship of the Miller Lite Ride for the Arts, with this year's event scheduled for Sunday. The annual community bicycle ride in 2001 raised just under $340,000 for the United Performing Arts Fund.

Miller also has supported a variety of other arts groups, such as Ko-Thi Dance Company and the Milwaukee Art Museum, as well as the Hunger Task Force of Milwaukee and programs to combat domestic violence.

The company also operates Tools for Success. Under that program, Miller partners with technical and community colleges in the states where it operates breweries to award technical graduates with the equipment and supplies they need to get jobs in their chosen professions.

Appeared in the Milwaukee Journal Sentinel on May 30, 2002.



TOPICS: Business/Economy; Culture/Society; Foreign Affairs; Front Page News; News/Current Events; US: Wisconsin
KEYWORDS: beer; millerbrewingco; millertime; milwaukee; southafrica

1 posted on 05/30/2002 12:25:22 AM PDT by HAL9000
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To: HAL9000
He said the deal's benefits would include combining the best operating practices of both Miller and South African Breweries, the latter of which is considered by some industry observers to be the most efficient brewer in the world.

Yes, the world needs a more efficient beer.

2 posted on 05/30/2002 12:30:24 AM PDT by HAL9000
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To: HAL9000
Who will own America?
3 posted on 05/30/2002 12:42:52 AM PDT by RLK
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To: HAL9000
I'm sorry. My PC circuits are out. And exactly how long will it be before South Africa is starving and/or completely wiped out from AIDS? Yeah....good move.
4 posted on 05/30/2002 12:48:43 AM PDT by guitfiddlist
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To: guitfiddlist
Bono may not be able to cure hunger in Africa ....but thirsty African are in luck.
5 posted on 05/30/2002 2:28:45 AM PDT by singletrack
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To: guitfiddlist
London-based South African Breweries

There's only so much in a name.

6 posted on 05/30/2002 4:28:37 AM PDT by Prodigal Son
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To: HAL9000
On a short-term basis, Miller expects to see an immediate benefit by bringing Pilsner Urquell, one of South African Breweries' better-known brands, into its U.S. distribution system. Bowlin said Pilsner Urquell, a Czech beer, would complement Miller's current main import, Foster's Lager, an Australian brand.

One of the world's best beers is Pilsner Urquell. On this factoid alone, I'm in favor of this buyout!

7 posted on 05/30/2002 5:17:21 AM PDT by Seeking the truth
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To: HAL9000
I guess for the old owners it's Miller Time!
8 posted on 05/30/2002 5:24:02 AM PDT by jordan8
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To: HAL9000
"We are going to be a company that's totally focused on brewing, marketing and selling beer."

They can start by making one that tastes good.

9 posted on 05/30/2002 5:41:01 AM PDT by Rodney King
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To: HAL9000
An example of the company's vaunted efficiency is its Ibhayi brewery, which opened in March 2001 in South Africa. The $90 million brewery can produce 1.9 million barrels a year with just 13 employees on each shift, according to the company. Miller's smallest brewery, at Tumwater, Wash., can produce 3 million barrels a year and has 410 employees. That brewery, formerly owned by Pabst Brewing Co., is much older than the Ibhayi facility.

It's too bad that there is no way to short real-estate. Tumwater, Washington is going to be losing a lot of jobs in the next two years.

10 posted on 05/30/2002 5:42:32 AM PDT by Rodney King
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To: RLK
Umm . . . the banks?
11 posted on 05/30/2002 7:53:20 AM PDT by 1rudeboy
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To: Seeking the truth
BINGO! Here's a toast hoping they bring PU to the States in barrels as well, I'd love to have that on tap here at home!
12 posted on 05/30/2002 8:06:50 AM PDT by Henchster
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To: HAL9000
Effula jig jig
13 posted on 05/30/2002 8:17:37 AM PDT by conserv13
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To: Henchster
You do that and I'll make a visit to my brother & sister-in-law in West Hills and stop by for a "beerchen" or two!
14 posted on 05/30/2002 8:48:03 AM PDT by Seeking the truth
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dunno if it's still true, but I heard that the #1 country in terms of ownership/voting-shares in US companies is England.
15 posted on 05/30/2002 9:02:13 AM PDT by mr1776
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To: Seeking the truth
Well, it's early here, but I may have to have a half-pint to toast to the SAB/Miller deal going through, and PU coming over in barrels!

____

Ahhhh! OK, as soon as it's here, your invite is open.

16 posted on 05/30/2002 9:10:46 AM PDT by Henchster
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To: HAL9000
...would complement Miller's current main import, Foster's Lager, an Australian brand.

The Foster's I get here sure ain't the same stuff I got in Australia. Is it really imported, or does Miller brew it in the USA?

17 posted on 05/30/2002 9:33:13 AM PDT by laredo44
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To: laredo44
Foster's sold in US is brewed in Canada
18 posted on 05/30/2002 11:44:34 AM PDT by kaktuskid
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To: HAL9000
Basically, South African Breweries knows the Southern half, indeed all, of Africa is a lost cause. They are making investment elsewhere so that they will not be destroyed along with that section of the world.
19 posted on 05/30/2002 4:18:16 PM PDT by RLK
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To: all

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20 posted on 06/13/2002 6:54:56 PM PDT by WIMom
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To: guitfiddlist
Read the story dunce. "South African Breweries PLC" is LONDON (England) based.
21 posted on 06/13/2002 6:57:44 PM PDT by GuillermoX
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To: HAL9000
Dear SABMiller here's your list of does and don'ts:
DO bring in a real beer recipe, while back in the old days I drank Miller because it was better than ButtWiper and RockyMountainPissWater it's still a pretty skanky beer and with the modern age of microbrews and imports there's just no reason for a man to drink 2nd rate beer (note, you guys make a lot of money from me on Pilsner Urqel so this shouldn't come as news).
DON'T change advertising firms. Whoever has been doing Miller commercials the last 4 or 5 years (since the 70s cop show style commercials) kicks butt. Brilliant commercials that I actually look forward to.
22 posted on 06/13/2002 7:11:58 PM PDT by discostu
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To: GuillermoX
Read the story dunce. "South African Breweries PLC" is LONDON (England) based

You might read up a little more in depth yourself, dimwit. Who gives a damn where a company flies it's flag, when a good part of its operations are based elsewhere.

1999
SAB moves its primary listing back to London, raising £300 million in international markets. The strategy is to develop and expand its international beer and other beverage operations and to invest in the rapidly-growing gaming industry in South Africa. SAB is a FTSE 100 stock.

23 posted on 06/15/2002 4:45:02 PM PDT by guitfiddlist
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To: guitfiddlist
And what does it matter that a country a co does business in has a high level of AIDS?

You're just mad that I called you a dunce, dunce. That's why you're stalking me, weirdo.

24 posted on 06/15/2002 5:24:36 PM PDT by GuillermoX
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To: HAL9000
"Yes, the world needs a more efficient beer. "

is their latest commercial "efficient"?
one of the worst i've seen...
the "bud lizards" are havin' a field day with it.

25 posted on 05/30/2004 10:15:13 AM PDT by hoot2
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To: Ironfocus

zulu brew ping


26 posted on 05/30/2004 10:17:08 AM PDT by cyborg
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To: HAL9000

Good, maybe they can teach them how to make a good beer. S. Africa has some good ones, I'd like to see Lion get imported.


27 posted on 05/30/2004 10:19:25 AM PDT by Central Scrutiniser (Hilarity ensues)
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To: HAL9000

Good, maybe they can teach them how to make a good beer. S. Africa has some good ones, I'd like to see Lion get imported.


28 posted on 05/30/2004 10:19:26 AM PDT by Central Scrutiniser (Hilarity ensues)
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To: laredo44

No one drinks Fosters in Australia, they mostly hate it, to the Aussies, Fosters is not Australian. QB is the beer for Australia!


29 posted on 05/30/2004 10:21:48 AM PDT by Central Scrutiniser (Hilarity ensues)
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To: Central Scrutiniser
No one drinks Fosters in Australia, they mostly hate it, to the Aussies, Fosters is not Australian. QB is the beer for Australia!

Mostly, I drank Tooheys or Tooths.

30 posted on 05/31/2004 6:28:04 AM PDT by laredo44 (Liberty is not the problem..)
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To: cyborg

I prefer the Namibian brews myself.


31 posted on 06/01/2004 3:24:34 PM PDT by Ironfocus
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