REFILE-UPDATE 3-Castel rules out SABMiller African beer deal

Thu Oct 7, 2010 9:36am EDT

(Corrects spelling of "brewer" in first paragraph, also removes ungrammatical clause in first paragraph)

* Castel denies talks on beer deal with SABMiller

* SABMiller shares up 0.3 pct at 19.98 pounds

* Deutsche Bank report highlights benefits of deal

(Rewrites adding Castel denial, background, shares)

By David Jones and Lionel Laurent

LONDON/PARIS, Oct 7 (Reuters) - French drinks group Castel denied on Thursday that it was in talks to sell its African beer business to SABMiller (SAB.L), the world's second-biggest brewer.

The Paris-based group was quick to pour cold water on a report in The Times that it was in talks about a deal worth over 6 billion pounds ($9.56 billion) with SABMiller linking their African beer operations. The Times report followed a broker's note highlighting a possible deal.

"It's wrong ... You are mixing it up with a study by Deutsche Bank. There are no negotiations, nothing," Guy de Clercq, director of BGI Castel, the beer and soft drinks subsidiary of the privately owned drinks group, told Reuters in Paris.

The Deutsche Bank report on Wednesday said Castel was a natural target for SABMiller's mergers and acquisitions ambitions, and a more compelling option than acquiring the Foster's Group FGL.AX beer business in Australia.

The report, dated Oct. 6, said Castel's beer business could transform Africa into a truly significant growth driver for SABMiller if the French group's controlling family were ever to put it up for sale.

Shares in SABMiller, which brews Peroni, Miller Lite and Grolsch beers, rose 0.3 percent to 19.98 pounds by 0953 GMT in a flat London stock market. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic on global brewers comparison. click on

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Castel was founded in 1949 by nine brothers and sisters and is still run by its founding president Pierre Castel, 84, and despite his reduced involvement there has been no indication that the controlling family might sell.

Analysts said a Castel link-up would make strategic sense with SABMiller strong in southern and eastern Africa such as Tanzania, Zimbabwe and Mozambique, and Castel in western Africa nations like Angola, Cameroon and Ivory Coast. "An acquisition of Castel would be an excellent strategic move for SABMiller, given the high margins and strong per capita beer consumption growth in Africa. SABMiller would eclipse Heineken and Diageo (DGE.L) in Africa," said analyst Simon Hales at broker Evolution Securities.

SABMiller has long been seen as an eventual acquirer of Castel when Pierre Castel relinquishes control. Indeed, SABMiller has the right of first refusal if the business is sold, Hales added.

The two reached a strategic alliance in 2001 whereby SABMiller took a 20 percent stake in the French group's beer and soft drinks operations in Africa and Castel acquired a 38 percent stake of SABMiller's African subsidiary.

The global brewing industry has seen a number of big deals in recent years. Belgium's InBev acquired St. Louis-based Anheuser-Busch in 2008, creating the world's biggest brewer AB InBev (ABI.BR) with brands including Stella Artois, Beck's and Bud Light.

The world number three brewer Heineken (HEIN.AS) bought the beer business of Mexico's FEMSA earlier this year in a $5.7 billion deal to give the Dutch brewer access to high growth beer markets.

As recently as August, there was market talk that SABMiller was looking at the beer operations of Australian group Foster's, which is valued at more than $10 billion as Foster's moves to split its beer and wine operation early next year. (Reporting by Karolina Tagaris and David Jones; Additional reporting by Victoria Howley; Editing by David Cowell, Mike Nesbit) ($1=.6274 pounds)

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