Molson Coors to buy StarBev for ?2.65bn
Source: FT
By Anousha Sakoui, Louise Lucas and Alan Rappeport
Apr 3rd
Molson Coors, the US-Canadian brewer whose brands include Coors Light and Carling, is to buy StarBev, the eastern European beer maker, for ?2.65bn.
The acquisition, from private equity group CVC, will help the beermaker expand as it seeks to extend sales beyond its core territories of the US, Canada and the UK. Starbev's core markets are in central and Eastern Europe.
"This is very much about growth," Peter Swinburn, chief executive of Molson Coors, said. "Our [markets] are flat and declining; these ones are growing."
He added that the deal was about buying growth and profitability: Starbev makes profit margins of 30 per cent at the level of earnings before interest, tax, depreciation and amortisation, double the level that Molson Coors achieves.
The brewer is planning to use StarBev, whose flagship beer is the Czech brand Staropramen, as a platform for growth and to sell its existing brands such as Carling. It is attracted to the potential recovery in Eastern Europe to growth rates achieved before the economic crisis.
The deal puts Starbev's enterprise value at 11 times its 2011 ebitda of ?241m. When SABMiller bought Australian brewer Foster's last year it paid a multiple of 13 times.
While the deal is expected to be earnings accretive in the first full year of operations, Mr Swinburn conceded that synergies, at 5 per cent of sales, were modest. "There's no overlap, so no natural synergies," he said.
He shrugged off concerns that Starbev operates in competitive markets. "Yes, they are split three ways but we have the number one brands in at least 50 per cent of these markets," he said.
Trevor Stirling, analyst at Bernstein Research, said it was unclear how quickly these markets could resume a growth trajectory and highlighted that the pricing environment remained difficult. "Having been owned first by ABInBev and then private equity, there is unlikely to be much low hanging fruit," he added.
For CVC, the sale represents a quick exit, having only owned the business since late 2009.
However, it will have a stake in the business going forward. Molson Coors' is financing the deal with $3bn in cash and debt, and also issuing a ?500m of convertible bond to CVC, that will allow it to benefit from any appreciation in Molson's stock in the future.
One person familiar with the sale said on Tuesday that the deal would yield several times what CVC invested in the company, and came in response to unsolicited approaches.
Anheuser-Busch InBev had the right of first offer to reacquire the business if CVC chose to sell StarBev, and was among those having considered a bid, along with Japanese brewers and western European drinks companies such as SABMiller, people with matter previously said.
ABI sold the business to CVC for an enterprise value of $2.2bn, with a further potential $800m payment dependent on CVC's return on its initial investment.
CVC was advised by Nomura and Molson Coors was advised by Morgan Stanley, Deutsche Bank and Barclays.