Brewers

The latest on M&A in the beer business.

July 2: Kohlberg Kravis Roberts & Co. flipped a stake of just under 50% in South Korea's Oriental Brewery Co. Ltd. to Affinity Equity Partners Ltd. for about $400 million, less than two months after the buyout titan bought the business from Anheuser-Busch InBev NV/SA. - Paul Whitfield

July 1: Anheuser-Busch InBev continued to divest assets selling four U.S. manufacturing plants to Ball Corp. for $577 million. - Lou Whiteman

June 15: AB InBev emptying its Central European cup, by shopping its Central European operations. - Baz Hiralal

June 1: KKR spending plenty on beer money: With leveraged lending still tight as a drum, mega-LBOs are few and far between. But that's not stopping private equity giant Kohlberg Kravis Roberts & Co. from getting its $1.8 billion carve-out of South Korea's Oriental Brewery Co. Ltd. from Anheuser-Busch InBev NV/SA from getting financed. -- George White

May 8: AB InBev sells rest of brewer to rich guy: Chen Fashu, ranked 31 on Forbes' list of the 400 richest Chinese last year, bought a 7% stake in Tsingtao Brewery Co. Ltd. for $235 million. Anheuser-Busch InBev NV sold the last of its stake in China's biggest brewer as it tries to shrink $45 billion of debt incurred from its recent $52 billion Euro-U.S. brewing merger. - Baz Hiralal

Continue reading below

May 5: Chugging drink deals on Cinco de Mayo: Swine flu may have put a damper on Mexico's Cinco de Mayo festivities, but at Dealscape we're still celebrating by taking a look at dealmaking in the industry that many Americans associate closely with the holiday, the liquor business. - Maria Woehr

April 23: Kirin bids for Lion Nathan: Kirin Holdings Co. Ltd., Japan's biggest drinks company, has offered to buy the 53.9% that it doesn't already own of Australian brewer Lion Nathan Ltd. to extend its reach into one of the world's biggest beer markets. - Paul Whitfield

April 13: AB InBev may sell Rolling Rock: Anheuser-Busch InBev NV/SA is reportedly considering a sale of its Rolling Rock brand in what could be its latest divestiture since the brewers' blockbuster merger last year. - Carolyn Murphy

March 5: AB InBev to sell assets: The brewing giant will make at least $7 billion in disposals in an effort to cut its debt levels. - Neil Sen

Feb. 26: SABMiller expands China footprint as AB InBev scales back: SABMiller plc (LSE:SAB) is acquiring three brewers in China through its long-standing joint venture with China Resources Enterprise Ltd. ... SABMiller goes head-to-head in China with its larger rival Anheuser-Busch InBev NV, which recently reduced its footprint in the country, selling its 19.9% stake in China's Tsingtao to Japan's Asahi Breweries for $667 million in cash. - Suzanne Stevens

Feb. 23: KPS brews up a company on Labatt purchase: Anheuser-Busch InBev NV has agreed to sell LaBatt USA to KPS Capital Partners as part of the Department of Justice's approval of the $52 billion merger of the companies. Terms of the deal were not disclosed. - Maria Woehr

Feb. 20: Kirin buys San Miguel Brewery stake: Japan's Kirin Holdings Co. Ltd. secured an initial 43% of San Miguel Corp.'s domestic brewing unit for 58.9 billion Philippine pesos ($1.2 billion) and agreed to enter talks about buying shares in the Philippine conglomerate's overseas brewing business. - Laura Board

The Deal magazine examines the blockbuster AB-InBev deal in a toast to the brewers: InBev executed a pitch-perfect acquisition of Anheuser-Busch, which was no pushover either. - Michael Rudnick

Also in February: Foster's Group cancels auction; Steel Partners ends Sapporo pursuit; Lion Nathan drops Amatil chase.

Feb. 4: AB InBev Korean unit on the block: Anheuser-Busch InBev NV has put its South Korean unit Oriental Brewery Co. on the block as it seeks to raise cash to meet short-term repayments on its roughly $45 billion of debt.Oriental Brewery, which InBev purchased in 2003, could fetch between $2 billion and $3 billion, according to Dow Jones Newswires. -- Paul Whitfield

Jan. 19: Kirin seeks San Miguel stake Japan's Kirin Holdings Co. entered talks to acquire a nearly 43% stake in the brewing unit of San Miguel Corp., of the Philippines. The transaction would be the latest foreign acquisition by Kirin. Reports suggest the stake could fetch around $1.3 billion. -- Renee Cordes

Dec. 8: A-B InBev layoffs: At least they're moving quickly: Newly merged Anheuser-Busch InBev plans 1,400 layoffs. As Corporate Dealmaker's Kenneth Klee points out, to some announcing the cuts right before the holidays seems harsh. "But wouldn't you want to know before you shopped?"

Nov. 24: The U.K.'s largest independent beer brand Cobra Beer Ltd. is on the block and a sale could yield up to $300 million, according to a Sunday Times report, while bankers will contact big-name potential suitors like newly merged A-B InBev, Heineken NV and Carlsberg A/S, The Cordes wrote.

Meanwhile, Anheuser-Busch InBev announced a rights offering to help repay debt and Argus' Erin Ashley Smith recently discussed beer consolidation on Inside the Deal.

Nov. 12: Anheuser-Busch Cos. shareholders approved its $52 billion sale to InBev SA, which must now divest the Labatt brand in the U.S. The deal closed Nov. 18. Agreed to in July, it followed a month-long standoff.

The news came about a week after Molson Coors Brewing Co. announced it owns 5% of Foster's Group Ltd., which prompted chatter the No. 3 U.S. beer company might be eying a takeover. (This came about two months after it looked like Australia's Foster's, having reported its first loss in 16 years, could sell its wine portfolio.)

Nov. 5: As InBev and Anheuser-Busch prepare for separate earnings announcements on Nov. 6, the $52 billion deal that will bring the beer giants together remains on track to close by year's end. That's not to say that hangover-inducing market conditions and unresolved issues with a major A-B joint venture haven't created some headaches. - Suzanne Stevens

(See: InBev postpones rights issue but Budweiser still on tap, Another Grupo-Modelo wrinkle in InBev's deal for A-B)

InBev and Anheuser-Busch agreed July 14 to the $52 billion deal. And it looked in September like InBev could sell off its South Korean beer business to help pay for it. In The Deal's latest Deal of the Quarter installment, Cheryl Meyer dissects the deal, its role in global M&A among brewers and digs into what might be next.

InBev in July raised to $70 its $65 per share offer to finally win its target. The two were said July 11 to be in friendly talks, so Dealscape started thinking up some new names for the joined company, while Corporate Dealmaker weighed in on some of the possible regulatory implications.

Earlier in the month, it looked like both sides were digging in for a fight. InBev on July 1 appeared willing to go hostile against its target, which had rejected its unsolicited $46.3 billion offer, but insisted it would prefer a friendly deal. As expected, Anheuser-Busch shot down the $65 per share takeover offer and instead outlined a $1 billion cost-cutting initiative on June 27. The rejection came hours after InBev sought to oust the Anheuser-Busch board. InBev elaborated on its proposed nominees July 7:

Cordes noted:

InBev's proposed alternative board at Anheuser-Busch includes Adolphus Busch IV, the uncle of current president and CEO August Busch IV; as well as Marjorie Bowen, former managing director of investment bank Houlihan, Lokey, Howard & Zukin; Ernest Mario, former CEO of Glaxo Holdings plc; William Vinson, former vice president and chief counsel of Lockheed Martin Corp.; and John Lilly, former CEO of Pillsbury Co.

In a way, The Deal's Ron Orol pointed out, InBev was acting like an activist investor. Anheuser-Busch then sued InBev in a move to stop the eventual buyer from making its case to A-B shareholders.

Meanwhile, another activist campaign against a brewer resurfaced July 8, when hedge fund Steel Partners Ltd. leaned on Japan's Sapporo Holdings Ltd. to hire an investment bank to look at a sale or a break-up. The fight began in February 2007, when New York-based Steel Partners, an investor particularly active in Japan, launched a campaign for up to two-thirds of Sapporo. (Steel Partners then retreated, saying it wanted just a third of the brewer and raised its offer price.)

But back to InBev-A-B. Between June 11, when InBev put forth its $65 per share offer for Anheuser-Busch, and June 26, when it rejected it, much transpired. Here's a recap:

• Anheuser-Busch was set to reject the bid, the Wall Street Journal and others reported June 25.
•  Earlier in the day, it was reported InBev sent its third letter to Anheuser-Busch reaffirming its proposal, having secured financing for the deal.
• Anheuser-Busch reportedly held a board meeting the week before, but family members remained divided over the deal, The Deal's Maria Woehr noted.
• Woehr wrote June 24 there were rumors that: rival "SABMiller plc held talks to explore merger options with Grupo Modelo SAB de CV and InBev, according to Reuters. The discussions included the possibility of SABMiller acquiring part or all of Modelo, if InBev succeeds in its proposed $46.3 billion takeover of Anheuser-Busch." (As of June 30, SABMiller remained silent on Modelo, while the latter's CEO resigned from the A-B board, Reuters reported June 20. A deal with Modelo, in which A-B holds a 50.2% stake, long looked like A-B's only hope for fending off InBev.)
  
• Kicking off the week of June 23, Busch family divisions were showing through. 
  

After weeks of buzz, InBev said June 11 it had put forth an offer for Anheuser-Busch of $65 per share, or nearly $46.3 billion. But it looked at the time as if Mexico's Grupo Modelo might crash the party. July 14: Modelo, which is 50% owned by Anheuser-Busch, could be a major roadblock, sources told Meyer.

Having failed to pounce on dealmaking opportunities as the industry consolidated around it, it looked like the brewer behind Budweiser and Bud Light had little choice but to succumb to the unsolicited approach, The Deal's Renee Cordes noted.  

"It is estimated that the enlarged entity could preside over a quarter of the world's beer market," Cordes wrote in May. InBev surpasses Anheuser-Busch as the largest brewer by sales, and the latter has long been talked about as a possible target as consolidation at the top of the beer industry abounds. According to the FT, Cordes pointed out, InBev's Plan B was at the time said to have been a deal with SABMiller if things didn't pan out with Anheuser-Busch.

Meanwhile, deals in two hot areas for brewers -- emerging markets and craft beer -- kicked off May.

SABMiller swooped on its latest target May 8 with a $130 million deal for CJSC Sarmat, which marks its foray into the Ukrainian market. It was SABMiller's first public acquisition since rumors swirled that the brewer was trying to crash the £7.8 billion ($15.9 billion) Scottish & Newcastle plc-Carlsberg A/S-Heineken NV party. (SABMiller again went after emerging markets in June with a deal, terms of which were not disclosed, for Russia's LLC Vladpivo.)

The Sarmat news came a week after Burlington, Vt.-based Magic Hat Brewing Co. & Performance Arts Center Inc. unveiled a tentative, $35 million deal for Seattle's Pyramid Breweries Inc. that will link two U.S. craft brewers. Craft brewers are distinct in that they don't just distribute the product, but make it as well. More consolidation is expected among craft brewers, which is growing faster than the rest of the sector, Magic Hat's attorney told The Deal. (Fellow craft brewers Redhook Ale Brewery Inc. and Widmer Brothers Brewing Co. in November unveiled plans for a $50 million merger.)

But back to SAB Miller and the last megamerger among brewers. In February, speculation abounded over whether SABMiller planned to crash the S&N-Carlsberg-Heineken party. It didn't, it turned out, according to a statement from SABMiller Feb. 20. The brewer said it "undertook a preliminary evaluation" of S&N, but decided against a bid. SABMiller put out the release in response to media speculation it was preparing to launch a counteroffer to the agreed-upon 800 pence per share S&N-Carlsberg-Heineken deal.

The Financial Times reported on its Web site Feb. 20 SABMiller was planning a counterbid worth 850 pence per share for S&N. Analysts expressed skepticism over the suggestion, according to a Reuters report Feb. 20, as an SABMiller-S&N transaction could raise competition concerns and SABMiller wouldn't gain full control of Russia's Baltic Beverages Holding AB, the 50-50 joint venture owned by S&N and Carlsberg. The buzz did, however, drive S&N shares up to 811.5 pence, before closing up 2.475% at 807.5 pence. Feb. 21, S&N shares were down 2.6% by early afternoon in London to 786.5 pence.

For a while, Edinburgh, Scotland-based S&N, which makes Kronenbourg 1664 and Newcastle Brown Ale, stood firm against Carlsberg and Heineken's hostile takeover moves. S&N began to crack Jan. 17, agreeing to talk with its suitors. The buyers then on Jan. 24 won an extra day to close the deal, having by noon Jan. 25 to declare their intentions before the U.K. Takeover Panel or jump ship.

Over the months, S&N tried several measures to bolster its takeover defense. The brewer on Jan. 10 rejected a sweetened offer from the would-be buyers that at the time valued the target at £10 billion. S&N then said it had shored up financing to buy Carlsberg out of the pair's Baltic Beverages JV. On Jan. 3, the company said it would consider some divestitures to fend off its pursuers, beyond a series of previously revealed sales to that end.

Carlsberg and Heineken on Nov. 15 raised their unsolicited offer for S&N to £7.3 billion, only to be rebuffed in turn. The news came nearly three weeks after S&N rejected their earlier, £6.8 billion advance. Days after Carlsberg and Heineken said they were mulling a bid and subsequent breakup for S&N, the target shot back against Carlsberg, alleging a breach of contract over their Baltic Beverages joint venture. (Carlsberg will control Baltic Beverages and the target's business in France and Greece, while Heineken will pick up S&N's operations in the rest of Europe, including the U.K.)

Meanwhile, the dealmaking among brewers chugged along through 2007.

SABMiller said Nov. 19 it would pay $1.2 billion for Dutch brewer Royal Grolsch NV, with plans to export it to emerging markets, where the premium beer market is developing, just days after Carlsberg and Heineken raised their S&N offer to $15 billion.

That sweetened bid followed news that Redhook and Widmer planned to merge in an all-stock deal worth a reported $50 million and form a company called Craft Brewers Alliance. The Pacific Northwest-based brewers first said in January they were considering a merger.

The Carlsberg-Heineken-S&N saga began a little more than a week after the No. 2 and No. 3 brewers in the U.S., Molson Coors Brewing Co. and SABMiller, made waves Oct. 9 when they unveiled plans to merge their U.S. and Puerto Rican operations to create a brewing heavyweight with $6.6 billion in annual revenue, taking Anheuser-Busch, the largest U.S. brewer, Molson Coors vice chairman Pete Coors pointed to "profound changes" in the industry in the U.S. posing new challenges for both companies. The Molson-Miller news, in turn, generated speculation about a possible team up between Anheuser-Busch and Belgium's InBev. The U.S. Department of Justice cleared the Miller-Coors venture June 5, 2008.

GLOBAL AMBITIONS

Meanwhile, brewers elsewhere around the globe were seeing swells of profits and thirsting for returns elsewhere, depending upon where their market reach extended.

SABMiller's Chinese joint venture said Aug. 24 it spent $79 million on four breweries in northeast China further expanding across the country. China Resources Snow Breweries Ltd., a JV between London- and Johannesburg-based SABMiller, which counts among its brands Miller and Pilsner Urquell, and China Resources Enterprise Ltd. that dates to 1994, expanded in the region in January with a $320 million cash to acquire remaining minority shares in 13 breweries in southwestern China's Sichuan province, where, the brewer said, beer consumption exceeds the nation's per capita yearly average, 23 liters, (or about 50 16 oz. beers), a figure, more recent reports suggest, is on the rise. The JV operates more than 50 breweries across mainland China and the country's favorite beer, Snow. Days later, Anheuser-Busch's Tsingtao Brewery Co. Ltd., the No. 2 brewer in the region, reported Aug. 27 an almost 64% jump in profit for the first half of 2007, to $348.4 million from $212.7 a year ago. A seemingly good place to be for brewers, U.S. craft beer entered the Chinese market in July.

Meanwhile Kirin Holdings Co. and Sapporo Holdings Ltd. both cut their full-year forecasts in early August, Reuters reported, pointing to lower demand in Japan. Earlier this year, Sapporo's largest shareholder, Steel Partners LP with 17.52%, sought management approval in February to boost its stake in the beermaker to 66.6% through its Steel Partners Japan Strategic Fund (Offshore) LP. Had it not failed, the deal would have effectively ceded control to the New York hedge fund.

And having successfully tapped into emerging markets like Russia and Asia, Dutch brewer Heineken reported Aug. 29 a rise in operating profit of nearly 35% for the first half of 2007, according to Reuters.

A LOYAL AUDIENCE

Back in the U.S., Coors was a brewer among many priming for the kick-off of regular season football Thursday night, Sept. 6. The Golden, Colo.-based company said Aug. 27 it had teamed with the NFL, offering customers incentives like regular season tickets and other prizes. The company, which calls Coors Light "The World's Most Refreshing Beer," also announced new partnerships with the New York Giants and the Tennessee Titans and extending deals with the New York Jets and Pittsburgh Steelers.

Ever-evolving with the seasons, Miller Brewing Co. detailed Aug. 22 its 2007 U.S. football promotion, teaming with ESPN nationally and a handful of teams locally, including five-year relationships with the Atlanta Falcons, Baltimore Ravens and Minnesota Vikings. Miller Lite will be the featured beer of choice. The brewer's campaign: "Beer That's Made to Be Great Makes Gameday Better," got underway in August. Both brewers boast relationships with other NFL teams, as well.

Earlier in the summer, Miller threw a little taste of Mexico into its lineup. The beermaker unveiled plans for a nationwide launch of Miller Chill, a bottled play on the chelada, a concoction consisting of beer and lime juice served over ice in a glass rimmed with salt. Chill pervaded the U.S. in the warmer months, after a March test launch in Arizona, Florida, New Mexico, San Diego and Texas. According to a Wall Street Journal report, the brewer planned to spend more than $30 million advertising the brew to give a shot in the arm to its U.S. sales as it faces stiff competition from microbrews and imports.

Indeed, it can be rough going out there. Pittsburgh Brewing Co. exited Chapter 11 under new ownership as Iron City Brewing Co. after filing for protection, for the second time, in December 2005 over a stink with the Pittsburgh Water and Sewer Authority. (Fellow brewer Coast Range Brewing Co. also found itself in bankruptcy protection in California on Dec. 12, 2007.)

Capping off 2006, private equity firms Pacific Equity Partners and CCMP Capital Asia Ltd. landed New Zealand alcoholic beverage group Independent Liquor Ltd. with $896 million after an exodus by strategic bidders including Lion Nathan Ltd., Foster's Group Ltd., Singapore-based Asia Pacific Breweries Ltd. and Nikko Principal Investments Ltd.

Foster's may be "Australian for beer," but in 2006, it smelled like a takeover target. The largest beer and wine producer Down Under saw its shares jump 9.7% Tuesday, Aug. 29, 2006, amid speculation in the Sydney Morning Herald that rivals SABMiller and InBev could make a go for the brewer. Yielding its richest return in 2006, Foster's Group Ltd. sold off its brand rights in 50+ countries to S&N for $539 million in April. In June, the company announced an auction for four assets: its Rosemount Denman and Penfolds Nuriootpa wineries in Australia; its Domaine La Motte estate in France; and fortified-wine production facility Seppeltsfield. The news came just weeks after the company moved out of China with the sale of its Shanghai operations to Japan's Suntory Group for an undisclosed price.

Foster's announced a restructuring program in mid-July to operate as three regional companies focused on Australia, Asia and the Pacific; on the Americas; and on Europe, the Middle East and Africa. The company has also put its wine group on the block after booking an $86 million impairment charge on the division. In early August, the company retreated from brewing in Asia, selling off $225 million worth of assets in India and Vietnam.

• Under that deal, SABMiller picked up Foster's brand in India for $120 million, while Asia Pacific Breweries picked up its Vietnam operations for $105 million.

LAST HURRAH

Before it began trimming its diet, Foster's won over Southcorp Ltd. with a sweetened, $2.5 billion bid in April 2005. Months later, Foster's was also thought to be a prospective bidder for Vincor International Inc. It wasn't in the stars, though, and after months of sparring, Vincor eventually went to Constellation Brands Inc. for $1.3 billion in April, a deal that Constellation chairman and chief executive Richard Sands called "meant to be."

A THIRST TO QUENCH

In 2006, Foster's wasn't the only beverage group to draw interest from thirsty acquirers.

• On Aug. 28, liquor titan Brown-Forman Corp. announced an $876 million deal for Mexican tequila company Grupo Industrial Herradura SA de CV.
• On Aug. 21, Kendall-Jackson emerged as the winning bidder for California winemaker Legacy Estates Group LLC with a $97 million offer put forth just days before.
• And kicking things off in May, Anheuser-Busch paid InBev $82 million for Rolling Rock.

Visit the complete Dealwatch Archive

Post a comment

Name:

Email Address:

URL:

Remember personal info?

Comments: (you may use HTML tags for style)

Please only click "Post" once. It may take a few moments to process.