Bloomberg News

AmBev Gains Control of Dominican Brewer For $1.2 Billion

April 16, 2012

Anheuser-Busch InBev NV (ABI), the world’s largest brewer, agreed to buy control of Cerveceria Nacional Dominicana for $1.24 billion, boosting its expansion with the addition of the Dominican Republic’s biggest beermaker.

AB InBev’s AmBev unit will pay CND’s majority owner E. Leon Jimenes SA about $1 billion cash and contribute AmBev Dominicana to a new holding company, according to a statement today. AmBev will also acquire a 9.3 percent stake in CND owned by Dutch competitor Heineken NV (HEIA) for $237 million, they said.

“This strategic alliance with ELJ is a key step towards our dream of becoming the leading player in the Caribbean and Central America,” Alexandre Medicis, AmBev’s vice-president for Hispanic Latin America, said in the statement.

AB InBev, based in Leuven, Belgium, is among beermakers seeking expansion in regions outside the U.S. and western Europe, where sales growth is restrained by high levels of competition and weak consumer spending. AmBev will indirectly own about 51 percent of CND after the transaction.

“The $1 billion investment is very much in the realm of bolt-on spending” and is small for AB InBev against an estimated free cashflow of about $5 billion, Giulio Lombardi, an analyst at Fitch Ratings, said today in an e-mail.

The combined operations will sell beer, malt and soft drinks in the Dominican Republic, Antigua, Saint Vincent and Dominica, and will export to 16 other countries. The transaction will provide an opportunity to expand CND’s Presidente brand outside the Dominican Republic, AmBev said.

Deal Multiple

Earnings before interest, taxation, depreciation and amortization of the combined business will be about $190 million in the first 12 months and the transaction is expected to add to earnings in the first year of operations, AB InBev said.

The cost of the transaction is more than the average for recent brewing deals. The implied enterprise value is about 13 times estimated annual Ebitda, the companies said. Bidders have paid an average 9.2 times current Ebitda for deals in the past five years, according to Bloomberg data.

AmBev shares were down 1.16 reals, or 1.5 percent, at 77.69 reals as of 12:20 p.m. in Sao Paulo. AB InBev shares rose 1.6 percent to 55 euros in Brussels. Heineken, which said it expects a one-time gain of about 130 million euros after tax from the sale of its stake in CND, rose 1.4 percent to 41.84 euros.

AmBev will nominate five board members for the joint company, and ELJ four. CND will continue to operate under the same name, with Franklin Leon as president and Alexandre Medicis as chief executive officer.

Brewing Consolidation

AB InBev gained the majority of its revenue last year from North America, and from Latin America through Cia. de Bebidas das Americas, or AmBev. It has sought to boost revenue by pushing its Budweiser beer in countries including Russia, China and Brazil, and introducing a new variety of its Bud Light beer, Platinum, in the U.S. as beer sales struggle in the country. The company was formed in 2008 when InBev NV took over Anheuser- Busch Cos. in a $52 billion deal.

The takeover of CND accelerates the consolidation of the global beer market. Molson Coors Brewing Co. agreed to buy central and eastern European brewer StarBev LP on April 4 to move into countries including the Czech Republic and Hungary. SABMiller Plc (SAB), the second-biggest global brewer, acquired Australia’s Foster’s Group last year for A$10.5 billion ($11 billion) and gained a stake in Turkey’s Anadolu Efes Biracilik & Malt Sanayii AS. Japan’s Kirin Holdings Co. agreed to buy Brazil’s Schincariol Participacoes e Representacoes last year.

Dominican Economy

Heineken, the world’s third-biggest brewer, had also been seeking to buy CND, Reuters reported March 27, citing unidentified people with knowledge of the matter.

The Dominican Republic’s economy expanded 4.5 percent in 2011, three times faster than the euro region’s. Further growth is expected in 2012 as a result of nickel and gold mining by Xstrata Plc and Barrick Gold Corp., President Leonel Fernandez said in February. The country’s tourism industry brought in $4.35 billion last year.

The acquisition of CND is expected to close in the second quarter, AB InBev said. Deutsche Bank AG and Lazard acted as financial advisers to AmBev, and ELJ was advised by Bank of America Merrill Lynch. Heineken was advised by Credit Suisse AG.

To contact the reporter on this story: Clementine Fletcher in London cfletcher5@bloomberg.net.

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net


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