Suitors reportedly thirsting for SABMiller's CEE brewers

Suitors reportedly thirsting for SABMiller's CEE brewers
Czech market leader Plzensky Prazdroj – which produces the Pilsner Urquell, Gambrinus, Kozel and Radegast brands - is the top asset to be sold.
By bne IntelliNews July 26, 2016

Local financial groups are hoping to compete with some of the world's largest buyout funds for a bevy of CEE brewing assets being sold by SAB Miller.  But at the same time the UK-listed company is racing to rescue its merger with fellow giant Anheuser-Busch InBev.

The pair returned to the negotiating table on July 26 as AB InBev raised its offer for its UK- based rival after Brexit caused a fall in the British pound and hence in the value of its offer. The Belgian-based AB InBev said it will now pay £45 a share, valuing SABMiller at about £79bn, up from its previous offer of £44.

Regulatory approval for the deal, originally announced in November, was sealed by SAB Miller agreeing to offload brewers in the Czech Republic, Poland, Hungary, Romania and Slovakia. Unnamed sources told Reuters on July 25 that the sales process is likely to start in late September. AB InBev wants to finalize the takeover before starting negotiations, they noted.

Czech market leader Plzensky Prazdroj – which produces the Pilsner Urquell, Gambrinus, Kozel and Radegast brands - is the top asset to be sold in transactions that could total €7bn. The package also includes Dreher in Hungary, Poland's Tyskie and Lech, Slovakia's Topvar and Ursus in Romania.

AB InBev is reported to be looking to sell the assets as a portfolio and avoid a piecemeal sale. European private equity fund Advent is one of the most determined suitors for the brands, the sources said. It is thought to be one of the few interested parties with the bulk to carry out a deal on its own.

Others are likely to need to team up. US buyout funds KKR and Bain Capital, as well as European funds BC Partners and PAI Partners are mentioned. Meanwhile, Japanese brewing group Asahi – as well as rival Kirin – have also been mentioned for some time as potential suitors.

Local brew

The sheer scale of the assets to be put on offer strongly suggests that local players will struggle to join the list of bidders. However, there are unsubstantiated reports that some are keen.

CEE specialist Mid Europa Partners is reportedly on the lookout for a bidding partner, Reuters' sources insist. Czech family office R2G is another name mentioned.

Speculation in Prague also suggests PPF Group, the investment vehicle of Czechia's richest man Petr Kellner, is interested in Pilsner Urquell. A price tag of around CZK100mn (€4bn) still looks steep however. PPF was forced last year to push a controversial debt deal past furious minority shareholders to fund its CZK64bn acquisition of mobile operator O2 Czech Republic.

At the same time, PPF might be seeking to team up with other local and foreign groups to put together a bid. Kellner has close ties to Slovak-Czech J&T Group. Local press speculate that Chinese funds are interested, and both PPF and J&T have been heavily involved in a new push by Prague to bring in investment from Beijing.

The mysterious CEFC increased its stake in J&T last year, as it also launched a shopping spree, buying up smaller assets around the country. Included in that burst of activity was Pivovary Lobkowicz. The company delisted from the Prague Stock Exchange on July 26 as part of a squeeze out. J&T has signaled interest in making a bid, sources claimed to Reuters, although its main focus is on Pilsner Urquell.