Asahi Group to buy InBev beer brands for $7.8bn



Financier Worldwide Magazine

February 2017 Issue

February 2017 Issue

Asahi Group Holdings Ltd, the 12th largest brewer in the world, is to acquire five Eastern European beer brands from brewery giant Anheuser-Busch InBev for $7.8bn. The deal is expected to close in the first half of 2017, subject to customary closing conditions and regulatory approval.

The acquisition will be, on completion, the largest overseas beer deal ever by a Japanese brewer. The company beat competition from Bain Capital, Switzerland-based Jacobs Holding AG and PPF Group to win control of the brands. Asahi had claimed that it had budgeted about $3bn to $4bn for overseas acquisitions, but was forced to revise this in light of increased competition.

The deal, announced in mid-December, will see Asahi acquire brands including Pilsner Urquell from the Czech Republic, Poland’s Tyskie and Lech, Hungary’s Dreher and Romania’s Ursus, in a deal which was made possible by AB InBev’s $100bn acquisition of rival SABMiller, finalised in October. In order to gain antitrust approval for the company’s mega merger with SABMiller, AB InBev has sanctioned the sale of the beer brands, as well as the sale of the company’s stake in South African drinks maker Distell Group Ltd. to Africa’s largest pension administrator, the Public Investment Corporation. SABMiller’s shareholding in Distell is estimated to be worth around $559m.

Asahi, which controls around 1 percent of global beer production, like many other Japanese companies, has been pursuing overseas deals in recent years. As the domestic Japanese market has shrunk, international dealmaking has become ever more popular. Asahi has claimed that the acquisition of the European assets will allow the company to generate around a quarter of its sales from overseas markets. In October 2016, overseas assets accounted for just 16 percent of Asahi’s sales. The company announced in October that it was buying SABMiller’s beer assets in Western Europe, including brands such as Peroni and Grolsch.

“Asahi aims, domestically, to be an industry leader focused on sustained corporate value enhancement and, internationally, to establish a distinct position as a global player that leverages its strengths originating in Japan,” the company said in a statement announcing the East European asset acquisition. According to the company’s press release, Asahi’s newly acquired assets are “highly compatible with our existing business in Western Europe and will strengthen our business platform, allowing Asahi to grow sustainably across Europe”.

The Eastern European business had annual earnings before interest, tax, depreciation and amortisation (EBITDA) of €493.8m in the year to the end of March. As a result, Asahi’s acquisition represents a multiple of 14.8 times EBITDA, which is higher than the 12 to 14 times brewing assets in mature markets often fetch. By comparison, Asahi paid around 15 times EBITDA for Peroni and Grolsch.

By completing another European deal, Asahi will increase its share of the European market (excluding Russia) to around 9 percent, making it the third largest player in the region, behind Heineken and Carlsberg. The acquisition of the Pilsner Urquell brand, the original Pilsner beer, is particularly notable for Asahi, as it has a top market share in the Czech Republic, which is the leading beer drinking country per capita.

The deal is the second largest on record in the food and beverage industry by a Japanese company after Suntory Holdings Ltd.’s $16bn acquisition of Beam Inc. in 2014. In December, AB InBev also agreed to sell its majority stake in Coca Cola’s African bottling venture for $3.15bn. As a result of divesting assets previously owned by SABMiller, AB Inbev has now raised some $27bn.

According to data from Dealogic, helped by the Asahi deal, 2016 was the second-biggest year on record for overseas acquisitions by Japanese companies, after 2012.

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Richard Summerfield

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