AB InBev agrees $1.6bn sale of SABMiller’s 49% stake in Chinese JV
By Vinicy Chan, Jonathan Browning and Rachel Chang
(Bloomberg) — China Resources Beer (Holdings) Co. agreed to buy out the remaining stake in Snow Breweries, its Chinese joint venture with SABMiller Plc, for $1.6 billion, smoothing the way for a takeover of its partner by Anheuser-Busch InBev NV. The Chinese brewer's shares jumped.
The deal values Snow at 11 times the brewer's 2014 net income before taxes, or about half the median 21 times earnings before interest and taxes valuation for brewery acquisitions announced over the past 12 months, according to data compiled by Bloomberg. The transaction was approved by the board and is subject to regulatory approval, China Resources said in a statement Wednesday.
Sale of the stake may help AB InBev secure Chinese antitrust approval for its acquisition of SABMiller. For China Resources, it will mean tackling the local market without an overseas partner, as beer consumption in the country is expected to grow with younger consumers increasingly migrating to high-end, foreign-brand brews.
"It will be tougher for China Resources Beer now as they have to develop their premium segment organically," Mizuho Securities Asia Ltd. analyst Jeremy Yeo said via telephone. "Their priority now will be to accelerate consolidation within beer space in China; any other large asset that comes up, they will be ready to get it."
Yeo had expected China Resources to pay $3.3 billion for the 49 percent stake it didn't own, while analysts at Nomura Holdings Inc. and Sanford C. Bernstein previously estimated the stake's value at about $5 billion.
The Chinese brewer's shares rose as much as 32 percent to HK$16.80 in Hong Kong, the biggest jump in almost a year. The benchmark Hang Seng Index rose 2.4 percent.
AB InBev said Feb. 25 that it was making progress with Chinese regulators on gaining approval for it to buy SABMiller, the beer industry's biggest-ever deal.
Beer sales in China, the world's largest beer market by volume, are expected to rise 41 percent in the five years through 2019 to reach 683 billion yuan ($104 billion), according to a June report from research firm Euromonitor.
Snow is the world's best-selling brand, Euromonitor's data shows. The partnership between SABMiller and China Resources, which began with two breweries in 1994, operates more than 90 operations across China, according to SABMiller's website.
Nomura and UBS Group AG advised China Resources on the deal, along with Rothschild & Co., Citigroup Inc. and HSBC Holdings Plc.
SABMiller media statement
SABMiller plc (SABMiller) has been informed by Anheuser-Busch InBev SA/NV (AB InBev) that it has entered into an agreement to sell SABMiller's 49% interest in its Chinese joint venture, China Resources Snow Breweries Limited (CR Snow), to China Resources Beer (Holdings) Co. Ltd. (CRB) for US$1.6 billion. CRB currently owns 51% of the joint venture.
The sale agreement is in line with AB InBev's commitment to proactively address potential regulatory considerations relating to its recommended acquisition of SABMiller. The proposed transaction with CRB is conditional on, and expected to close in conjunction with, the completion of AB InBev's acquisition of SABMiller. This is currently expected to occur in the second half of 2016.
In addition, the agreement with CRB is subject to any applicable regulatory approval in China, and AB InBev and CRB will work closely together through any such process.
Alan Clark, Chief Executive of SABMiller said: "Our CR Snow joint venture was established in 1994 and the Snow brand was developed in the same year. Since then, Snow has grown to become the world's largest beer brand by volume, selling more than 100 million hectolitres last year. Since forming the joint venture we have enjoyed a mutually beneficial partnership with CRB and together we have achieved great things in the Chinese beer market over the last 22 years."