Kirin will need to show its true colours
The much rumoured sale of San Miguel Brewery will ultimately prove if Japan’s Kirin is really keen on expanding its presence in Asia – or not. Kirin, which holds about 48 percent of San Miguel, has two options: either to join the fray and make an offer to the San Miguel Corporation for its 51 percent stake in the brewer, or do another stint like it did at Singapore’s Fraser & Neave (F&N) last year. Though holding a stake in F&N, it first let the beer division, Asia Pacific Breweries, go to Heineken. Then, in February this year, it sold its own 15 percent stake in the Singapore conglomerate F&N to Thai billionaire Charoen Sirivadhanabhakdi, pocketing about USD 500 million in windfall profits.
San Miguel Brewery, which enjoys a near 90 percent monopoly in the Philippine beer market, is attracting attention from suitors. At 16 million hl beer production in 2012, the Philippines are the smallest beer market in Asia, but being a monopoly, San Miguel enjoys amongst the highest profits per hl in the region. The alleged asking price – 20 times San Miguel’s EBITDA – seems way over the top. Yet this is what Ramon Ang, President of the San Miguel Corporation, is demanding. If he gets his way, the 51 percent stake could fetch USD 5.9 billion, it was reported.
Mr Ang was quoted as saying on 29 October 2013 that “several parties” have approached the company about buying its majority stake in the Philippines’ biggest brewer. Although he would not specify, it’s likely that all the industry heavyweights – Heineken, SABMiller, AB-InBev and Carlsberg – are interested.
On average, brewers paid a multiple of 13 times EBITDA in multi-billion dollar acquisitions over the past five years. However, Heineken was willing to pay USD 4.5 billion, or about 17.3 times EBITDA, last year to take control of Asia Pacific Breweries, the maker of Tiger beer. This must have given Mr Ang ideas.
Kirin bought a 48 percent stake in San Miguel Brewery in 2009 for USD 1.3 billion. If Kirin sells its stake rather than bid for the whole of San Miguel, it will likely pocket a cool few billion dollar. “In the shorter term, it's good that the financial burden will be reduced. But in terms of its medium to long-term strategy, Kirin is basically returning to the starting point, with the loss of its foothold in Southeast Asia,” Satoshi Fujiwara, an analyst at Nomura Securities, commented on Kirin’s exit from F&N.
The same would hold true in the case of San Miguel. The sale of San Miguel will show Kirin’s true intent.
San Miguel Corporation is disposing of assets in order to finance a USD 35 billion investment plan to expand in airlines, energy and infrastructure. Beverages accounted for 13 percent of the group’s revenue last year, it was reported.
