By Sam Boughedda
Boston Beer Co. (NYSE:SAM) shares rose more than 2% Wednesday after Bernstein analysts said they see a potentially attractive logic to Heineken (OTC:HKHHY) acquiring the company.
"One of the most common investor questions we get is... what could the next big beer deal be?" wrote the analysts, who said that in their view, "one such deal could be the acquisition of Boston Beer (Twisted Tea, Truly Hard Seltzer, etc.) by Heineken, with an attractive strategic rationale for both parties."
However, they "don't see a deal as imminent."
The analysts acknowledged that "Heineken has underperformed in the USA for more than five years," with the weakness being "nearly universal across the portfolio."
"Heineken have commented that they have a brand problem in the USA, not a scale problem, pointing out the spectacular success of Craft and FMBs," said the analysts. "Whilst we agree with their diagnosis, we do see a potentially attractive logic to buying Boston Beer. It would be a modest bolt-on for the group but transformative for its U.S. business."
The analysts believe a deal would bring significant synergies in logistics, sales, elimination of the overhead of a quoted company, media purchasing, and transfer of best practices.
They add that "Boston Beer could become an innovation hub for Heineken both in the U.S. and globally" and that culturally, "Heineken has the best shot at maintaining Boston Beer's 'secret sauce' for innovation."
Bernstein sees a significant upside for Boston Beer as Heineken would bring much-needed supply chain best practices. In addition, they believe selling Boston Beer to Heineken "could generate solid if not spectacular returns for Heineken."