Daily Management Review

With AB Inbev Beer Deal, Japan's Asahi Expands in Europe


With AB Inbev Beer Deal, Japan's Asahi Expands in Europe
The presence of Asahi Group Holdings in the eastern European region would be boosted by its buying of a group of eastern European beer brands from Anheuser-Busch InBev, in the largest overseas beer deal by a Japanese brewer, for 7.3 billion euros ($7.8 billion).
To ease clearance from competition regulators for its $100 billion takeover of SABMiller, finalised in October, Anheuser-Busch InBev agreed to sell brands including Pilsner Urquell from the Czech Republic, Poland's Tyskie and Lech, Hungary's Dreher and Romania's Ursus.
This deal would be Asahi's biggest acquisition and is expected to be closed in the first half of next year. SABMiller's Italian brand Peroni and Dutch beer Grolsch have already been bought by it.
in the year to the end of March, 493.8 million euros in annual earnings before interest, tax, depreciation and amortization (EBITDA)  was noted, Asahi said on Tuesday.
A consortium led by Swiss investment firm Jacobs Holding, Czech investment firm PPF, China Resources and private equity firms Bain Capital and Advent International were included in an auction where Asahi was widely seen as the frontrunner.
The purchase would allow it to generate nearly a quarter of sales from overseas, up from 16 percent in October, said Asahi, which needs to offset sluggish growth in its home market.
Also reaching outside Japan, in a deal that will merge the largest banana distributors in Asia and Europe, Sumitomo Corp agreed last week to buy Ireland's Fyffes for 751 million euros.
Putting it third behind Heineken with 20 percent and Carlsberg with 12 percent, Bernstein analyst Trevor Stirling said that Asahi's latest deal will give it 9 percent of the European beer market excluding Russia.
Eastern European consumers already drink a lot of beer. Even though SAB's European margins had been eroding for years amid price competition, the Czech Republic, where Asahi will be the leader, has the world's highest per capita consumption.
"They've been very tough (markets) and profits have been declining, not growing," Stirling said. Although, scope for growth is offered by the rising popularity of premium and craft beer, Stirling added.
It took a year to complete the biggest deal in consumer goods history, the takeover of SABMiller, and included sales of SAB's businesses in Europe, the United States and China.
These asset sales have removed a large proportion of its earnings capacity, effectively increasing the price for the higher growth areas of Africa and South America even they have recouped nearly 25 percent of the $100 billion price tag.
"The deal has become very expensive," said John Colley, a professor at Warwick Business School, but he added AB InBev, known for its frugal culture, could exceed its target for $1.4 billion in cost savings.
This year $77.6 billion on outbound mergers and acquisitions have been spent by Japanese companies not including the Asahi deal. Thomson Reuters data shows, seeking to counter deflation, weak consumer spending and a shrinking population at home.

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