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Pilsner Urquell factory

Asahi to Buy SABMiller's European Beers in $7.8 Billion Deal

Dec. 13, 2016
The deal further strengthens Asahi’s foothold in Europe after the Japanese brewer agreed to pay 2.55 billion euros for AB InBev’s Peroni and Grolsch brands earlier this year.

Asahi Group Holdings Ltd. agreed to buy SABMiller Plc’s (IW 1000/195) central and eastern European assets from Anheuser-Busch InBev NV for 7.3 billion euros ($7.8 billion), in a move that catapults Japan’s largest brewer to third place on the continent.

Asahi expects the acquisition -- which spans five countries and includes beer brands such as Pilsner Urquell, Kozel and Tyskie -- to close in the first half of 2017, the Tokyo-based brewer said in a statement Tuesday. The deal would help Asahi position its overseas business as a growth engine to transform itself into a global powerhouse, it said.

The deal further strengthens Asahi’s foothold in Europe after the Japanese brewer agreed to pay 2.55 billion euros for AB InBev’s Peroni and Grolsch brands earlier this year. For AB InBev, the divestment brings it a step closer to meeting the antitrust commitments that allowed it to buy SABMiller for about $100 billion.

“We had estimated a value between $5 billion and $6 billion, so the price paid by Asahi looks pretty full and great for AB InBev,” Trevor Stirling of Sanford C. Bernstein said by phone. The analyst estimates Asahi will account for 9% of the beer sold in Europe, excluding Russia, after the deal.

Asahi shares fell 4.6% by the close of Tokyo trading Tuesday, the biggest drop since June. AB InBev rose as much as 1.5% in Brussels.

A completed sale would bring some much-needed cheer for AB InBev investors, who had seen the stock slide 15% this year through Monday. In October, the brewer missed profit estimates for the sixth straight quarter, illustrating why it needed to acquire SABMiller.

The offer values the SABMiller assets at about 15 times Ebitda of 493.8 million euros for the year ended March 2016, according to Bloomberg calculations. That compared with the median of about 11.5 times trailing twelve-month Ebitda for nine brewery acquisitions announced worldwide in the past five years, according to data compiled by Bloomberg. It would be the biggest by a Japanese company, surpassing Kirin Holdings Co.’s acquisition of Australia’s Lion Nathan Pty in 2009 for $3.4 billion including debt, according to the data.

Deutsche Bank AG and Lazard Ltd. advised AB InBev, while Rothschild & Co. and Barclays Plc advised Asahi.

Japan Beer Market Stagnating

The $21 billion Japanese beer market is stagnating, with little growth projected through 2019, according to data tracker Euromonitor. Over the same period, the global market for suds should expand by 8.2%.

Asahi and other Japan brewers have been chasing overseas acquisitions to reduce their dependence on a domestic market hampered by a shrinking population. Buying the additional SABMiller brands will also help Asahi attract younger Japanese drinkers with established premium beers, said Haitong International securities analyst Nicolas Wang.

“There was also probably a lot of competition for the assets, which pushed up the price,” said Wang in an interview. “It’s possible the company views this as a strategic investment worth paying a premium for. After all, asset quality under SABMiller is very good.”

By Grace Huang and Thomas Buckley

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Licensed content from Bloomberg, copyright 2016.

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