AB-InBev sells central European business and abandons plans to quit Germany
The operations will be renamed StarBev, AB-InBev said. As part of the deal, set to close in January 2010, AB-InBev will license CVC to brew and distribute brands like Stella Artois, Beck’s, Löwenbräu, Hoegaarden, Spaten and Leffe.
This has already raised some eyebrows in Belgium, since Leffe is marketed as a Belgian monastery beer and for reasons of credibility should not be brewed elsewhere under license. But do they still care about this at AB-InBev? Apparently not.
In both deals with CVC, AB-InBev has the option of buying back the assets if they are ever put up for sale – something the company may be tempted to do once it further decreases its leverage. But that may only apply to the Korean business, as Korea is fundamentally a growth market.
In central Europe, the picture is different. AB-InBev’s Czech and Romanian units did not live up to expectations while the Croatian and Montenegrin subsidiaries failed to boost their market share, AB-InBev told analysts.
Looks like these central European assets could be gone forever. For further proof of this assumption, look no further: AB-InBev’s central European unit was headed by a Brazilian, Francisco Sá.
A CVC spokesperson was quick to point out that CVC’s investment plan calls for CVC to stick to these assets for four to six years before exiting. If need be, CVC will keep them longer.
Actually, exiting may not be such a problem for CVC. There is still plenty of scope for consolidation in these markets. Who knows, once the economy improves, perhaps Heineken or SABMiller will be happy to buy some of these assets in order to increase their own market share and profitability. Of course, regulatory consent permitting.
With central Europe gone and debt reduction under control, AB-InBev appears to have given up its plans to sell the German beer business. Which may be some good news for once. But AB-InBev is not going to relent on its cost cutting fervour. So expect another round of job cuts in AB-InBev’s western European operations in the new year.
