AB-InBev contemplates exit from central Europe – Comment
Belgian media reported that the world’s largest brewer was selling its central European operations because they are considered non-strategic. The markets are fragmented with more than two players operating in each and earnings are low. Small wonder that AB-InBev hopes to focus on its more profitable north and south American operations.
CVC Capital Partners, Kohlberg Kravis Roberts and TPG are among private equity groups that have expressed interest in the assets, British media said.
AB-InBev wants to sell off assets as it tries to raise money to reduce the debt it took on when it bought Anheuser-Busch last year for USD 52 billion.
Of course, AB-InBev refused to comment on the sale.
In April, AB-InBev reached an agreement to divest its South Korean beer business to Kohlberg Kravis Roberts & Co for USD 1.8 billion.
The trouble is, if AB-InBev is selling its central European beer business to a private equity firm, it will reap a much smaller profit.
Whilst, theoretically, the going rate for beer businesses is eight times EBITDA, private equity is never going to pay AB-InBev more than six times EBITDA because how will they make a killing once they prepare for their exit?
Kohlberg Kravis Roberts & Co (KKR) is a case in point. Before this private equity outfit managed to lay its hands on AB-InBev’s Korean Oriental Brewery, media pundits said that AB-InBev would get in excess of USD 2.4 billion for it.
Now did they? No. All AB-InBev took home from the fire sale was the measly sum of USD 1.8 billion.
Sorry to have to spell it out, but these central European breweries, if they are sold, will go for a song.
