Heineken Sells Hartwall Unit to Royal Unibrew for $614 Million

Heineken NV, the world’s third-biggest brewer, will sell its Finnish drinks business Oy Hartwall AB to Danish Royal Unibrew A/S for an enterprise value of about 470 million euros ($614 million), it said today.

Royal Unibrew and Heineken also agreed to extend their current relationship so Royal Unibrew will brew Heineken beer for Finland, Estonia, Latvia and Lithuania for the next 10 years. Royal Unibrew already brews Heineken in Denmark and distributes the beer in Baltic countries, according to today’s statement.

Hartwall will continue to distribute other Heineken-owned brands in Finland, including Sol and Strongbow. The enterprise price includes interest, net debt and net debt equivalents.

Heineken, based in Amsterdam, said in February that it was reviewing whether it’d sell Hartwall, which it bought in the 2008 takeover of Scottish & Newcastle Ltd. The unit has about 850 employees and makes cider, wine and spirits as well as beer and soft drinks. The deal announced today is expected to close in the fourth quarter of this year.

“We are convinced that Hartwall’s future development is best served as part of Royal Unibrew, our long-time business partner in Denmark and an important beverage company in the Nordics and Baltics region,” Heineken Chief Executive Officer Jean-Francois van Boxmeer said in the statement. “We look forward to building on our business in the region working together.”

Heineken rose less than 0.1 percent to 51.74 euros at 9:03 a.m. in Amsterdam. Royal Unibrew fell 5.1 percent to 519 kroner in Copenhagen.

Growth Markets

The maker of Amstel is seeking to cut costs across Europe as cash-strapped consumers buy less beer in western and northern Europe, its largest region. It’s also focusing on expanding into fast-growing markets. Last year it bought out its joint venture partner in South East Asia, taking control of Asia Pacific Breweries for S$5.6 billion ($4.4 billion) to gain more exposure to markets including Vietnam and Indonesia. Heineken will use the proceeds of the sale to cut debt, it said.

Orkla ASA and Nordic Capital Svenska AB had also sought to buy Hartwall, Reuters reported in May, citing three people familiar with the situation.

“Hartwall is a very similar business model to Royal Unibrew in Denmark,” Royal Unibrew Chief Executive Officer Henrik Brandt said in a telephone interview. The company might sell new shares that represent “a little less” than 10 percent of its current share capital to raise about 570 million kroner ($100 million) and may raise some funding for the deal by mortgage lending, he said.

Heineken reported first-quarter sales that fell unexpectedly and reined back its expectations for annual growth in April, saying that “challenging trading conditions in austerity affected markets” in Europe and would weigh on organic growth expectations.

Before it's here, it's on the Bloomberg Terminal.