* Anheuser-Busch InBev may look at SABMiller deal
* Brokers divided whether a deal makes sense
* Other candidates: Modelo, Diageo, PepsiCo
By Philip Blenkinsop and David Jones
BRUSSELS/LONDON, March 18 (Reuters) - With Bud swallowed and almost digested, there is growing speculation that Anheuser-Busch InBev (ABI.BR) may be thirsty for another deal.
Some brokers have already been exploring the possibilities and see SABMiller SAB.L, AB InBev's nearest rival, as a prime target as this would increase the world's largest brewer's exposure to fast-growing emerging markets.
Such a takeover would combine AB InBev's Budweiser, Stella Artois and Beck's brands with SABMiller's Miller Lite, Peroni and Grolsch and produce about a third of the world's beer.
Belgium-based AB InBev bought Anheuser-Busch for $52 billion in the world's second biggest cash deal in 2008 and with its three-year savings target of $2.25 billion likely to be exceeded, its debt although still high is falling fast.
AB InBev executives are focused on internal growth and bringing its net debt to core profit (EBITDA) ratio down to 2 times by 2012, but Chief Financial Officer Felipe Dutra said the debt ratio target did not preclude it buying again.
Net debt has fallen to $39.7 billion at the end of 2010 from $56.7 billion just after the Anheuser-Busch deal, bringing its net debt/EBITDA ratio down to 2.9 from 4.7.
If AB InBev is back in the market for another mega deal, here are some of its options:
The most obvious purchase for the AB InBev would be the other half of Grupo Modelo GMODELOC.MX, the Mexican brewer of Corona beer which holds a 56 percent share of the world's sixth largest beer market.
AB InBev took a 50 percent stake via its purchase of Anheuser-Busch, but the joint owners do not see eye to eye.
Modelo's controlling family shareholders challenged InBev's right to own the stake, although an arbitration panel dismissed their $2.5 billion claim last year. [ID:nLDE66B0RE]
Grupo Modelo itself has consistently said it has no plans to sell an equity stake to its partner. [ID:nN05131397]
If the Modelo families do eventually sell it is reasonable to assume that the deal would not be cheap -- probably around $15 billion, which would include a premium of some 50 percent.
"The Modelo business is managed pretty well, so you would question whether AB InBev would be able to extract the necessary savings to make it work," said Simon Hales, analyst at brokers Evolution Securities.
Analyst Eddy Hargreaves at brokers Collins Stewart says AB InBev could and should bid for SABMiller to create a beer giant he dubs ABSAB. He says it has already looked closely at SABMiller and a deal would be strategically and financially sensible with anti-trust issues not a big concern.
"We think AB InBev ought to be interested in SABMiller, and SABMiller's interest in Foster's risks drawing a bid. We think it is likely AB InBev would move on SABMiller before the latter could consummate the Australian transaction," he said.
SABMiller is favourite to buy Foster's FGL.AX beer business for more than $10 billion after the Australian group decided to spin off its wine unit to focus on beer. [ID:nL3E7EH0AR]
Hargreaves says an AB InBev deal at 28 pounds a SABMiller share would value the brewer at $71 billion. After a $8 billion disposal of SABMiller's stake in MillerCoors, AB InBev's closely watched debt to EBITDA would rise to 4.2 times compared to the 5.5 times after its $52 billion Anheuser-Busch 2008 deal.
Credit Suisse's Anthony Bucalo says, "Over time we believe both these companies strategic interests will continue to align and this would be of benefit to both sets of shareholders".
Graphic on top global brewers: r.reuters.com/puq97r
The geographic fit would be good with SABMiller adding its presence in Africa, eastern Europe, China, Colombia and Peru to AB InBev's in North and South America.
The United States would present a problem as the combined group would have a near 80 percent market share and would almost certainly have to sell SABMiller's 58 percent stake in MillerCoors, its U.S. joint venture with Molson Coors (TAP.N).
Trevor Stirling, analyst at Bernstein Research, says AB InBev would struggle to get a good price for the stake because there would be effectively only one obvious buyer, Molson Coors.
ABSAB could also take hits in China, where it might be forced to relinquish SABMiller's 49 percent in brewer Snow, as well as in Africa, where SABMiller Africa has a cross shareholding with privately-owned French drinks rival Castel.
"If I were AB InBev, I would ask could I pay 28 to 30 pounds and still make money on the deal and I think the answer is 'no'," Bernstein's Stirling said.
Soft drinks would be another problem. AB InBev is the biggest bottler outside the United States for PepsiCo (PEP.N) and SABMiller a big bottler for Coca-Cola (KO.N). The combined group would have decide between the two soft drink giants.
Some analysts believe AB InBev may look at spirits and beer group Diageo (DGE.L) which is of a similar size to SABMiller.
They argue Diageo's share price has been pedestrian in recent years and it might be vulnerable especially if AB InBev looks closely at Diageo's high cost base and sees a rationale for bringing worldwide beer and spirits businesses together.
Others say spirits and beer do not mix well, and that AB InBev's success in cash generation and cost cuts has come from linking beer businesses. It might not want the distraction of running the high marketing budget of a spirits group.
Diageo and SABMiller could be tempted into a merger to escape the clutches of AB InBev, but analysts say this would be seen as a defensive move and unlikely to be welcomed by markets.
AB InBev is already the largest Pepsi bottler in Latin America and the two groups have an alliance to purchase a range of items from advertising to travel.
A takeover has been mooted for some time. In terms of distribution, there are clear savings to be made.
But PepsiCo is more than just the maker of Pepsi-Cola, Gatorade and Tropicana juices, with a substantial food business such as Frito-Lay snacks and Quaker oatmeal.
Its drinks operation could cost some $60-65 billion, but would PepsiCo be willing to sell what is effectively the heart of its operations?