Asahi to buy East European beer brands from AB InBev for $7.8 bln

Record ID: 76959

  • Title: Asahi to buy East European beer brands from AB InBev for $7.8 bln
  • Date: 13th December 2016
  • Summary: TOKYO, JAPAN (MAY 17, 2016) (REUTERS) ASAHI GROUP HOLDINGS HEADQUARTERS A GOLDEN BEER FOAM DISPLAY ON TOP OF ASAHI GROUP HOLDINGS HEADQUARTERS
  • Embargoed: 28th December 2016 12:08
  • Keywords: Asahi buy East European beer brands AB InBev $7.8 bln
  • Location: LONDON, ENGLAND, UK + TOKYO, IBARAKI, JAPAN + AFRICA + SINGAPORE
  • City: LONDON, ENGLAND, UK + TOKYO, IBARAKI, JAPAN + AFRICA + SINGAPORE
  • Country: Japan
  • Reuters ID: LVA0015CPVR7X
  • Aspect Ratio: 16:9
  • Story Text: Asahi Group Holdings will buy a group of eastern European beer brands from Anheuser-Busch InBev for 7.3 billion euros ($7.8 billion), boosting its presence in the region in the largest international beer deal by a Japanese brewer.
    Anheuser-Busch InBev agreed to sell the brands, including Czech market leader Pilsner Urquell, Poland's Tyskie and Lech, Hungary's Dreher and Romania's Ursus, to ease clearance from competition regulators for its $100 billion takeover of SABMiller, finalised in October.
    The deal, expected to close in the first half of next year, would be Asahi's biggest acquisition and its latest purchase in Europe, where it has also bought SABMiller's Italian brand Peroni and Dutch beer Grolsch.
    It was announced on Tuesday (December 13) morning, less than 24 hours after the deadline for final bids, according to sources close to the matter.
    Asahi said on Tuesday that the business had annual earnings before interest, tax, depreciation and amortization (EBITDA) of 493.8 million euros in the year to the end of March.
    Based on that figure, its bid represents a multiple of 14.8 times, which is higher than the 12 to 14 times brewing assets in mature markets normally fetch.
    Asahi's winning bid compared with the 15 times EBITDA it paid for Peroni and Grolsch, which was fueled in part by synergies in Australia with Asahi's existing business.
    Asahi, which is looking to offset sluggish growth in its home market, said the acquisition would lift overseas sales as a proportion of total sales to nearly a quarter from 16 percent in October.
    "The Japanese brewing industry is suffering from demographics in Japan. Essentially the population is shrinking, the volume of beer sales in Japan has fallen dramatically over the last 20 years or so from 570 million cases to 420 million cases approximately, that's a huge contraction. So what the Japanese brewers are doing, they're looking overseas to buy in the growth and Asahi has already bought some European brands and it's gone out today and has announced that it is going to buy five more," said Tom Stevenson, Investment Director, Fidelity International.
    Also expanding from its Japanese base, Sumitomo Corp agreed last week to buy Ireland's Fyffes for 751 million euros in a deal that will merge the largest banana distributors in Asia and Europe.
    The acquisition will give Asahi about 9 percent of the European beer market, excluding Russia, said Bernstein analyst Trevor Stirling, placing it third behind Heineken with 20 percent and Carlsberg with 12 percent.
    Sources had told Reuters that Asahi was a favourite to buy the brands. In the first round of bidding, Asahi competed against a consortium led by Swiss investment firm Jacobs Holding, Czech investment firm PPF, China Resources and private equity firms Bain Capital and Advent International, they said.
    Asahi shares fell more than 6 percent before closing down 4.6 percent, with market participants pointing to investor nerves about how the deal would be funded.
    Asahi gave no details, but a source close to the situation said the Japanese brewer would use debt on its own balance sheet, which as of September showed $471 million in cash, according to Thomson Reuters data.
    Not including the Asahi deal, Japanese companies have spent $77.6 billion on outbound mergers and acquisitions this year, Thomson Reuters data shows, as they seek to counter deflation, weak consumer spending and a shrinking population at home.
    The Asahi deal pushes this year's figure close to the record $87 billion Japanese companies spent on overseas M&A deals in 2015. It is the second biggest acquisition by a Japanese brewer on record, behind brewer and distiller Suntory Holdings Ltd's near $14 billion purchase of Beam in January 2014.
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