April 3 (Bloomberg) -- Molson Coors Brewing Co., the U.S. maker of Carling lager, agreed to buy StarBev LP for 2.65 billion euros ($3.54 billion) to add beer brands such as Staropramen and provide a route into central and eastern Europe.
The acquisition from private-equity firm CVC Capital Partners Ltd. and StarBev management will help Denver-based Molson Coors expand outside its main regions of North America and the U.K., where high unemployment and aggressive competition are weighing on growth. StarBev operates nine breweries in Central and Eastern European countries including the Czech Republic, Hungary, Romania and Bulgaria.
“Molson Coors’s portfolio has had an extremely mature-market focus,” said Melissa Earlam, an analyst at UBS AG in London. “Relative to their peers, they’re very underrepresented in emerging markets.”
Molson Coors fell 1.2 percent to $45.10 at 9:54 a.m. in New York. The shares had gained 4.9 percent this year before today.
StarBev generated earnings before interest, taxes, depreciation and amortization of 241 million euros in 2011, Molson Coors said in a statement. The acquisition represents a multiple of about 11 times Ebitda, the company said.
The deal would be the largest brewery acquisition since SABMiller Plc bought Australia’s Foster’s Group Ltd. in December for about $12.9 billion, including debt, according to data compiled by Bloomberg.
“The headline multiple for the deal looks quite reasonable, and net-net, what they’re buying looks to be more profitable than I’d expected,” Earlam said.
Committed financing is in place to complete the acquisition from CVC and StarBev management, Molson Coors said. Production and purchasing efficiencies resulting from the deal will lead to pretax savings of about $50 million by 2015, the brewer said.
Permanent funding for the transaction will take the form of $3 billion in cash and debt and the issue of 500 million euros of convertible debt to the seller, Molson Coors said.
Brewers including Kirin Holdings Co., Asahi Group Holdings Ltd. and Suntory Holdings Ltd. of Japan had expressed interest in buying StarBev, people with knowledge of the plans said in February. CVC, which manages a 10.8 billion-euro European buyout fund, purchased the operations from Anheuser-Busch InBev NV in 2009 for 1.5 billion euros.
AB InBev, the world’s biggest brewer, had a right of the first option to buy StarBev, according to people with knowledge of the matter. It sold the assets to pay down debt from InBev NV’s $52 billion acquisition of Anheuser-Busch Cos. in 2008.
StarBev has more than 20 brands including local labels such as Borsodi, Kamenitza, Bergenbier, Ozusko, Jelen and Niksicko, and also distributes brands such as Stella Artois, Beck’s, Hoegaarden, Lowenbrau and Leffe under license.
“StarBev, as a market leader in the CEE region, provides Molson Coors with a great platform for growth and an excellent foundation from which to extend our key brands, such as Carling, into Central and Eastern Europe,” Molson Coors President and Chief Executive Officer Peter Swinburn said today in the statement. The beer market in the region is “attractive, with strong historical trends and upside potential,” he said.
The acquisition will “also enhance our portfolio in some of our current and planned markets,” Swinburn said, as the company seeks to “deepen our reach into growth markets.”
CVC is looking to return cash to investors and invest the remainder of its pool before raising a new one next year. The firm is considering selling shares in car-racing company Formula 1 through a listing in Singapore, people familiar with the matter said last month. Earlier this year, it agreed to buy Ahlsell AB, a Swedish construction products supplier, from Cinven Ltd. and Goldman Sachs Group Inc.
The StarBev acquisition is subject to approval from European competition authorities, according to the statement, and is expected to close in the second quarter of 2012. StarBev competes with brewers including SABMiller, Heineken NV and Carlsberg A/S in the central and eastern European region.
Morgan Stanley served as the lead financial adviser to Molson, while Barclays Plc and Deutsche Bank AG acted as co-advisers and Kirkland & Ellis LLP provided legal counsel. Morgan Stanley and Deutsche Bank are providing committed debt financing for the deal.
Nomura Holdings Inc. Provided financial advice to Starbev and CVC, while Freshfields Bruckhaus Deringer LLP served as legal adviser.
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