Comprehensive M&A data with integrated detailed company information
Heineken to take minority stake in CR Beer to challenge AB InBev in China
Posted on Friday, 03 August 2018 13:53
Heineken has reached an agreement with China Resources Enterprise (CRE) to take a 40.0 per cent stake in its China Resources (CR) Beer company for about HKD 24.30 billion (USD 3.10 billion).
The deal creates a long-term partnership in mainland China, Hong Kong and Macau as the businesses involved look to tap consumer appetite for premium brands in the market.
CR Beer is billed as the undisputed leader in the industry with its Snow Beer accounting for roughly 90.0 per cent of its sales.
However, Heineken sits behind large players such as Anheuser-Busch InBev’s Budweiser brand and is looking to challenge the company that took over SABMiller for GBP 100.67 billion in 2016.
Under the terms of the partnership arrangement, the Dutch brewer will combine all of its operations in China with CR Beer, including the licensing to its lead product on a long-term basis.
The country is billed as the largest beer market in the world by volume and is expected to continue improving significantly as demand for international brands grows.
Heineken’s offer price is about HKD 36.21 per share to CRE, which will own the remaining 60.0 per cent of the business.
In turn, CRE will acquire 5.20 million stocks in Heineken, representing about 0.9 per cent of its entire capital, for a total EUR 464.00 million.
Following closing, the Amsterdam-headquartered firm is expecting pro-forma net debt to earnings before interest, taxes, depreciation and amortisation ratio to exceed the target 2.5x, with the deal to immediately boost margins and earnings per share in the near term.
CR Beer announced the partnership represents an important and strategic opportunity for the group to strengthen its presence in the premium beer market.
Together the businesses are highly complementary and the deal has significant potential for value creation for both parties.
Completion is subject to further due diligence and negotiation, as well as the signing of legal documents and is expected to occur before the end of the year.
AB InBev, though its purchase of SABMiller, inherited 49.0 per cent of CR Beer but had to sell to settle antitrust concerns.
In the year ended 31st December 2017, the Snow Beer-owner generated turnover of CNY 29.73 billion (USD 4.35 billion), up 3.6 per cent from CNY 28.69 billion.
© Zephus Ltd