Australia: AB InBev sells Carlton & United Breweries

After having cancelled the IPO of its Asian business last week due to “prevailing market conditions” (, 13.7.2019), AB InBev announced today to sell its Australian subsidiary Carlton & United Breweries (CUB) to Asahi Group Holdings. The purchasing price is said to be AUD 16.0 billion (USD 11.3 bn) in enterprise value which is an implied multiple of 14.9 times last year’s normalized EBITDA. Asahi will be allowed to continue selling AB InBev’s global and international brands in Australia.

Asahi Group Holdings, the parent company of Asahi Breweries, aims to boost its group's overseas business to make up for falling demand in the domestic market through the company's biggest-ever acquisition.

On the other side, the deal helps to reduce AB InBev’s massive debts of more than USD 100 billion which mainly stems from the successful takeover of rival SABMiller in 2016 (, 28.9.2016). CUB together with its iconic brands like Victoria Bitter (VB), Carlton Draught, Foster’s and Pure Blonde was one of breweries, which AB InBev acquired from SABMiller at that time.

The move is consistent with AB InBev’s strategy to invest in growing markets and to divest business in mature markets.  On October 11, 2016 AB InBev already announced to sell SABMillers former West European business, including the Peroni, Grolsch and Meantime brand families and associated businesses in Italy, the Netherlands, and the UK to Asahi  for EUR 2.55 billion (USD 2.9 bn) on a debt free/cash free basis (, 11.10.2016). This represented an estimated multiple of 21.5 times the brands’ EBITA which contrasted the multiple of 17.1 times EBITDA that AB InBev paid for SABMiller.

 Shortly afterwards Asahi also bought SABMiller’s former East European business including brands and breweries like Pilsner Urquell (Czech Republic), Tyskie and Lech (Poland), Dreher (Hungary), Ursus (Romania) and Topvar (Slovakia) for  EUR 7.3 billion (USD 7.8 bn). This was a multiple of 14.8 times EBITA (, 13.12.2016).

Latest foreign investment so far was the purchase Fuller, Smith & Turner (Fuller's), a regional, family-run 300,000 hl brewery, from Chiswick, West London, UK, about half a year ago (, 5.2.2019). The enterprise value was said to be GBP 250 million (USD 327m) on a debt free, cash free basis what represented a 23.6 EBITDA multiple.

Besides the current transaction, AB InBev still intends to sell part of their Asian business in a partial IPO. “AB InBev continues to believe in the strategic rationale of a potential offering of a minority stake of Budweiser Brewing Company APAC Limited (Budweiser APAC), excluding Australia, provided that it can be completed at the right valuation,” the company said in a today’s media release.

Carlos Brito, Chief Executive Officer of AB InBev, was quoted as saying: “We continue to see great potential for our business in APAC and the region remains a growth engine within our company. With our unparalleled portfolio of brands, strong commercial plans and talented people, we are uniquely positioned to capture opportunities for growth across the APAC region.”

According to AB InBev, Asahi has committed financing in place and the transaction is subject to customary closing conditions, including but not limited to regulatory approvals in Australia. The transaction is expected to close by the first quarter of 2020.

“The proposed transaction will increase the EBITDA of Asahi's Australian business to around JPY100bn [USD 0.93 bn], creating a third core pillar alongside the Japanese business with JPY200bn [USD 1.85 bn] EBITDA and the European business with around JPY100bn [USD 0.93 bn] of EBITDA,” Asahi said in a statement today.

Asahi’s rationale for the proposed transaction is on one side CUB’s brand portfolio with “a range of much-loved brands, such as Carlton and Great Northern which are leaders in Australia, as well as superior marketing and product development capabilities.” Additionally, “ UB is highly profitable, with an EBITDA margin of over 40%, leveraging its broad brand portfolio and operational excellence across Australia,” the company said.

Thirdly, “Australia is an attractive market enjoying sustainable economic growth. Asahi already participates in the Australian beer and cider categories (with global premium brands such as Asahi Super Dry, Peroni and Pilsner Urquell) and the non-alcoholic beverage category having undertaken several soft drinks acquisitions since 2009. Moreover, we expect to acquire the broad distribution network of CUB as well as benefitting from the advantage of greater scale in areas such as procurement by collaborating with Asahi's existing Australian business which is of comparable size to CUB.” And finally, “the acquisition also further enhances Asahi's management resources by bringing with it a wealth of talented global and local management.”

Once closed, both major Australian brewing companies are in hands of Japanese brewers. In 1989 Kirin Brewery Company of Japan bought a minority stake in Lion Nathan. Ten years later Kirin Holdings Company purchased all shares in Lion Nathan and merged the business with National Foods, which it owned since 2007. In 2011, the company changed its name to Lion, with National Foods becoming a Melbourne-based subsidiary called Lion Dairy & Drinks. As part of the intended sale of the whole Australian food unit, Kirin sold in April 2019 its Australian cheese business (, 26.4.2019).

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