Asahi's SABMiller Deal Makes It Europe's Third-Biggest BrewerBy and
Brewer to buy brands such as Pilsner Urquell, Kozel, Tyskie
Deal is largest overseas beer purchase by a Japanese company
Asahi Group Holdings Ltd. agreed to buy SABMiller Plc’s central and eastern European assets from Anheuser-Busch InBev NV for 7.3 billion euros ($7.8 billion), its biggest deal ever and one that catapults Japan’s largest brewer to third place on the continent.
Analysts, including Tomonobu Tsunoyama at Mitsubishi UFJ Morgan Stanley Securities Co., described the price tag as being on the “high side.” Shares of Asahi fell for a second day in Tokyo after the companies announced the deal, losing as much as 4.1 percent Wednesday to the lowest intraday price since August.
The purchase further strengthens Asahi’s foothold in Europe after the Japanese brewer agreed to pay 2.55 billion euros for AB InBev’s Peroni and Grolsch brands earlier this year. For AB InBev, the divestment brings it a step closer to meeting the antitrust commitments that allowed it to buy SABMiller for about $100 billion.
“We had estimated a value between $5 billion and $6 billion, so the price paid by Asahi looks pretty full and great for AB InBev,” Trevor Stirling of Sanford C. Bernstein said. The analyst estimates Asahi will account for 9 percent of the beer sold in Europe, excluding Russia, after the deal.
Asahi expects the acquisition -- which spans five countries and includes beer brands such as Pilsner Urquell, Kozel and Tyskie -- to close in the first half of 2017, the Tokyo-based brewer said Tuesday. The deal would help Asahi position its overseas business as a growth engine to transform itself into a global powerhouse, it said.
Asahi shares fell 1.4 percent to 3,447 yen by the close of trading Wednesday, extending a drop of 4.6 percent the previous day. AB InBev rose 1.7 percent in Brussels Tuesday.
A completed sale would bring some much-needed cheer for AB InBev investors, who had seen the stock slide 15 percent this year through Monday. In October, the brewer missed profit estimates for the sixth straight quarter, illustrating why it needed SABMiller.
The offer values the SABMiller assets at about 15 times Ebitda of 493.8 million euros for the year ended March 2016, according to Bloomberg calculations. That compares with the median of about 11.5 times trailing 12-month Ebitda for nine brewery acquisitions announced worldwide in the past five years, according to data compiled by Bloomberg. It would be the biggest by a Japanese company, surpassing Kirin Holdings Co.’s acquisition of Australia’s Lion Nathan Pty in 2009 for $3.4 billion including debt, according to the data.
Deutsche Bank AG and Lazard Ltd. advised AB InBev, while Rothschild & Co. and Barclays Plc advised Asahi. Akeel Sachak, a managing director and global head of consumer at Rothschild, said he expects to see more cross-border industry deals in 2017.
The $21 billion Japanese beer market is stagnating, with little growth projected through 2019, according to data tracker Euromonitor. Over the same period, the global market for suds should expand by 8.2 percent.
Asahi said its sales in Europe will jump to about 300 billion yen ($2.6 billion), raising its revenue from overseas to 24 percent after the deal is completed next year.
Asahi and other Japanese brewers have been chasing overseas acquisitions to reduce their dependence on a domestic market hampered by a shrinking population. About 24 percent of Asahi’s revenue will come from outside Japan once the deal’s done, it said. Buying the additional SABMiller brands will also help Asahi attract younger Japanese drinkers with established premium beers, said Haitong International securities analyst Nicolas Wang.
“There was also probably a lot of competition for the assets, which pushed up the price,” Wang said in an interview. “It’s possible the company views this as a strategic investment worth paying a premium for. After all, asset quality under SABMiller is very good.”
— With assistance by Rachel Chang, and Ruth David