Asahi wins auction for Pilsner Urquell
At long last. After discussions had dragged on for months, Asahi managed to beat its private equity competitors in a final auction round on 12 December 2016 to buy former SABMiller’s brewing assets in five central European countries from AB-InBev for EUR 7.3 billion (USD 7.8 billion).
The jewel in the sale is Plzensky Prazdroj, the number one Czech brewer and owner of the Pilsner Urquell brand. There is also the Polish number one, Kompania Piwowarska, maker of Tyskie and Lech, and Romania’s top brewer, Ursus. Slovakia’s Topvar and Hungary’s Dreher are each number two in their markets.
The downside is that, while Poland is a big beer-drinking market, all these markets are saturated and low-growth with heavy price competition that eats into margins.
AB-InBev put the assets on the block in April as part of its plan to win European regulatory approval for its takeover of SABMiller, a deal which was finally completed in October 2016.
We at BRAUWELT International wondered at the time why AB-InBev did not fight with the European Commission, the EU’s antitrust body, to keep SABMiller’s central European units, since AB-InBev is largely absent from these markets?
In our view, AB-InBev had no truck with these mature markets and took the EU’s decision as a pretext to be shorn of these businesses – a view which was echoed by analyst Trevor Stirling of Bernstein, who suggested the decision to sell Pilsner Urquell et al had more to do with commercial rather than regulatory concerns.
Asahi’s purchase of Pilsner Urquell left some investors with a bad taste because of the unexpectedly high price tag. Japan’s number one brewer had said earlier it had budgeted about USD 3 to 4 billion for overseas acquisitions, but was forced to spend double that amount in order to defeat bidders, including private-equity firm Bain Capital, Switzerland-based Jacobs Holding AG and PPF Group, an investment firm controlled by Czech businessman Petr Kellner.
Asahi announced on 13 December 2016 that SABMiller’s central European businesses registered profits (EBITDA) of EUR 493.8 million in the year ending March 2016. Based on that figure, its bid represents a multiple of 14.8 times profits, which is higher than the 12 to 14 times brewing assets in mature markets normally fetch.
For comparison, AB-InBev had to offer 15.4 times EBITDA for SABMiller in order to win shareholder approval. Many insiders thought this was quite a hefty premium for the company.
In April this year, Asahi bought some European beer brands, including Peroni, Grolsch and Meantime, for EUR 2.55 billion (USD 2.9 billion) from SABMiller, in another divestiture by AB-InBev to get regulatory clearance. It then paid a profit multiple of 15 times EBITDA.
The deal is the second-largest on record in the food and beverage industry by a Japanese company, after Suntory Holdings spent USD 16 billion to buy US drinks maker Beam in 2014.
Japanese brewers have been actively looking overseas for growth because the domestic market is shrinking, owing to a population that is getting both smaller and older. Sales of Asahi’s flagship Super Dry were down nearly 4 percent in the first 11 months of this year, media say.
In 2015, Asahi ranked 13th among the world’s largest brewers with an output of 20 million hl beer and a global market share of 1.1 percent, according to the Barth Report.
Asahi said the acquisition would lift overseas sales as a proportion of total sales to nearly 25 percent from 16 percent in October.
The acquisition will give Asahi about 9 percent of the European beer market, excluding Russia, said Mr Stirling, placing it third behind Heineken with 20 percent and Carlsberg with 12 percent.
