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Posted March 2012

Czech Republic - Asahi allegedly after StarBev

The rumour mill is spinning wildly. According to gossip mongers, the Japanese brewer Asahi is only days away from buying eastern European brewer StarBev in a deal likely to fetch up to USD 3 billion. If Asahi finally manages to clinch a deal, it will be a true indication of how desperate the Japanese alcohol producers are to grow overseas sales.

Private equity firm CVC Capital Partners, which owns StarBev, apparently wants to sell the business and Asahi is said to have put a big price on the table thus outdoing private equity co-bidders .

Needless to add that all parties declined to comment.

Driven by falling domestic sales, Japan's leading drinks companies have embarked on an overseas spending spree. This is supported by low borrowing costs and a strong yen.

No doubt, the Japanese firms are willing to splash out big time. In August 2011, Asahi purchased New Zealand beverage company Independent Liquor from Pacific Equity Partners (PEP) and Unitas Capital for NZD 1.5 billion (USD 1.27 billion). The transaction valued the company at 13 times EBITDA, similar to valuations paid by Japanese companies in other deals.

Kirin's AUD 3.3 billion buyout of Australian brewer Lion Nathan in 2009 came in at 12.5 times EBITDA, preceding its USD 970 million acquisition of Singapore-based Fraser & Neave a year later, also valued at 12.5 times EBITDA. That was topped by Kirin acquiring Brazil's Schincariol in August 2011 at 15.7 times EBITDA. Meanwhile, rival Asahi in July of last year agreed to buy Permanis, Malaysia's second-biggest soft drink maker, for USD 273 million, which equates to an EBITDA of 15.4 times.

For comparison, InBev paid an EBITDA multiple of 12.4 for Anheuser-Busch in 2008.

Speaking of which: AB-InBev, which has strong ties (brand-wise and other) with StarBev, shouldn't be too worried about StarBev going to Asahi. Nowhere do the two compete against each other directly. In fact, the Japanese and the Brazilians got to know each other well when AB-InBev sold a 19.9 percent stake in Chinese brewer Tsingtao to Asahi in 2009, reducing its own stake to 7 percent.

What would Asahi get out of buying StarBev? I would say: management expertise and a beer company that is probably as lean as a skinless chicken and therefore more profitable than any of Asahi's other operations. Asahi reported an EBITDA margin of 11 percent for the financial year 2011. StarBev definitely must do better than that.

Asahi afford to fork out USD 3 billion for StarBev? They sure can although Asahi's debt level in 2011 already stood at 2.35 times EBITDA.

 

Australia - SABMiller criticises the previous management of Foster's

Hello? Didn't they do due diligence before they bought Foster's? So why complain now? At two recent investor conferences in the U.S. (February 2012) SABMiller's head of investor relations, Gary Leibowitz, accused former Foster's CEO John Pollaers and his team of failing to properly implement beer sales and marketing fundamentals and said it’s time to go back to basics.

Mr Leibowitz told analysts the key areas Foster's will concentrate on to resuscitate the business. They will centre around better relations with retailers and improved channel management.

Above all, a mutually beneficial relationship with Coles and Woolworths - the nation's largest sellers of liquor - will be established in an effort to repair the business' performance and arrest the decline in Foster's national share of the beer market.

Mr Leibowitz criticised Foster's previous executives for neglecting these areas, including brand differentiation and creating category value. Read on

 

Australia - Coca-Cola Amatil hopes to snatch Corona licence from Foster's

Will Foster's be trembling in their boots? Coca-Cola Amatil chief Terry Davis has warned former joint-venture partner SABMiller, the new owner of brewing major Foster’s, that he will be back in the Australian beer market in 2014. Speaking at the release of the Coca-Cola Amatil's (CCA) annual results on 22 February 2012, Mr Davis said expansion into the alcoholic beverage sector remained a "core strategy for CCA".

CCA has already held talks with global brewers for new licences, such as Grupo Modelo’s Corona Extra as soon as a two-year non-compete agreement with SABMiller comes to an end. Read on

 

India - Crash landing for Kingfisher Airlines and United Spirits?

What a partner Heineken has picked in India. The larger-than-life entrepreneur Vijay Mallya is having troubles both at his Kingfisher Airlines and at his liquor company United Spirits. On 20 February 2012 The Times of India newspaper reported that the beleaguered Kingfisher Airlines' operator Mallya plans not to shut down the private carrier which struggled to stay afloat after further large-scale flight disruptions and resignation of pilots.

Kingfisher Airlines' bank accounts were frozen by income tax officials due to non-payment of bills. The airline has repeatedly requested additional loans from its lenders but none of the pleas have yet been agreed to.

UB Group's flagship spirits arm, United Spirits, is on wobbly financial ground too as interest costs mount and it faces low growth in markets such as Tamil Nadu and West Bengal due to regulatory issues, Indian media reported on 24 February 2012. Read on

 

United Kingdom - Sam Adams to be brewed by Shepherd Neame

They have had Sam Adams contract-brewed in the U.S. for decades, so why not have it produced under licence abroad? In February 2012, U.S. craft brewer Boston Beer said that Kent-based Shepherd Neame will now be producing the beer after having previously served as their importer into the UK. Read on

 

Italy - Revolving doors at Birra Peroni

Italy, the eurozone's third-largest economy is in recession and prime minister Mario Monti predicted worse to come. What do brewers do in times of economic crisis? Change executives. Roberto Jarrín, 46, is the new CEO of Birra Peroni, the Italian subsidiary of SABMiller Group.

Mr Jarrín, born in Brazil and raised in Ecuador, joined Birra Peroni in January 2012, swapping seats with Birra Peroni's previous CEO Alfonso Bosch, who has, in turn, become president of SABMiller's subsidiary in Ecuador, Cervecería Nacional.

Mr Bosch has headed Birra Peroni, Italy's number two brewer behind Heineken, since 2008 and has seen the brewer's domestic output decline.

Italy or Ecuador? If pressed for a decision, I would choose Ecuador over Italy. Read on

 

Australia - Milk wars hit Lion's profits

When the supermarket chain Coles began selling two-litre bottles of house brand milk for AUD 2 (USD 2.12) in January last year, a discount of up to 33 percent that was instantly matched by larger rival Woolworths and German-owned discounter Aldi, Australia's brewer-cum-dairy-company Lion knew they were in for a rough year.

This was confirmed in February 2012 when Lion, a fully-owned subsidiary of Japan's Kirin, reported they had to write-down AUD 1.2 billion (USD 1.3 billion) across its business for the financial year to 30 September 2011.

While the milk price wars between Coles and Woolworths was the single biggest blow, the business faced other significant headwinds. Read on

 

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