Regional heavyweights join chase for SABMiller's CEE brewers

Regional heavyweights join chase for SABMiller's CEE brewers
Plzensky Prazdroj, the Czech Republic's biggest brewer, is the jewel in the assets for sale.
By bne IntelliNews November 8, 2016

Regional heavyweights, including Polish and Hungarian insurance and energy giants, are amongst a list of six suitors to have submitted preliminary bids for SABMiller’s Central and Eastern European beer brands, media reports claimed on November 8.

The list of bidders for the assets – amongst which Plzensky Prazdroj, the Czech Republic's biggest brewer, is the jewel – includes bids from one international strategic investor and several investment fund consortia, Reuters claims, citing unnamed sources. Despite suggestions that the race may prove a little rich for local players - bids are likely to rise above €4bn - two offers are said to stem from the Central European region.

The most intriguing sees Polish and Hungarian companies close to their respective governments teaming up. Amongst the bids is a joint offer from a consortium powered by Polish insurer PZU and Hungarian oil and gas giant Mol.

The brewing businesses of global giant SABMiller based in the Czech Republic, Poland, Hungary, Romania and Slovakia are to be spun off to appease anti-trust regulators as part of Anheuser-Busch InBev's $100bn-plus takeover of the company.  Japan's Asahi, which was reported last month to have offered €4.3bn, is also joined on the list of bidders by Czech financial group PPF, the newswire claims.

The price appears high for PPF, the investment vehicle of Petr Kellner, the Czech Republic's richest man, who often co-operates with Slovak financial group J&T Group, which is setting up investments from China into consumer-facing companies, including small Czech brewer Lobkowicz. China Resources Beer Holdings was earlier said to have been interested in the assets.

A bevy of international funds is also said to have made bids. US buyout fund Bain Capital has joined forces with European private equity firm Advent, while peer KKR has made a joint offer with Mid Europa Partners, the sources said. Swiss investment firm Jacobs Holdings and Canadian pension fund PSP Investments are also reported to be in the game.

Czech market leader Plzensky Prazdroj – which produces the Pilsner Urquell, Gambrinus, Kozel and Radegast brands - is the top asset to be sold by SAB. The package also includes Dreher in Hungary, Poland's Tyskie and Lech, Slovakia's Topvar, and Ursus in Romania. Earlier this year, Exane BNP Paribas analysts estimated the brands accounted for about $2.3bn in sales.

SABMiller is currently the third-largest brewer in CEE with a market share of roughly 15%, according to Euromonitor. AB InBev’s share is 7.9%. In April, Belgium-based AB InBev accepted a $2.9bn offer from Japan's Asahi for European premium brands Peroni and Grolsch, as well as British craft beer Meantime.

The list suggests several potential local suitors may have dropped out of the race. Other names mentioned earlier this year included J&T, Polish billionaire Sebastian Kulczyk, and Czech investment group R2G.

It may be that a deal would prove too rich for their blood; an issue that perhaps has driven Polish state-controlled giant PZU into a partnership with Hungary's Mol, in which Budapest holds around 25%. The pair appear to funding a bid that will be fronted by Polish juice maker Maspex Wadowice.

If the report is accurate, it would suggest the two major partners would appear to be branching out, although regional peers of Mol have been boosting their downstream retail exposure in recent years in response to shaky oil markets. PZU is already busy in that department, leading a state-sponsored push to build a new Polish retail banking group that will be amongst the country's largest.

Most intriguingly, such a team would suggest the growing friendship between the populist governments in Warsaw and Budapest is spilling over into economic partnerships between large state-linked companies. Both retain a keenly statist approach to their economies, but have also shown numerous times that politics and local interests trump economics when it comes to management strategy.

Both are also enthusistically nationalist. That suggests any joint ownship could potentially throw up issues in a region in which beer brands are often viewed fondly as expressions of cultural pride.