AB InBev's sells Central European Operations to CVC

AB InBev's sells Central European Operations to CVC

Brewer Anheuser-BuschInBev will sell its operations in Central Europe and the Balkans to private-equity firm CVC Capital Partners for $1.62 billion in cash, plus bonds and minority shares that bring the value of the deal to $2.23 billion.

The deal puts AB InBev, the world's largest brewer, solidly above a target it set last year of selling at least $7 billion in assets after buying U.S. brewer Anheuser-Busch for $52 billion. AB InBev executives made the pledge while taking on $45 billion in debt to buy Anheuser, in an effort to keep the brewer's investment grade credit rating while it pays down some of that debt.

The operations include regional beer brands and a few more well-known ones, such as Staropramen. AB InBev stands to make up to an additional $800 million on CVC's return on its initial investment. CVC will rename the operations StarBev.

The operations being sold are located in Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, Romania, Serbia and Slovakia. Together they comprise less than 3% of the brewer's total earnings before interest, taxes, depreciation and amortization, analysts estimate.The markets in those countries are small and rely on a number of different breweries. That appears to conflict with AB InBev's strategy of focusing on large markets, such as the U.S., Brazil, Russia and Ukraine, where it can operate large distribution networks and a few big, efficient breweries.

"I can understand the logic, but it's a pity that they give up a little of their emerging market profile," said Petercam analyst Kris Kippers. "If you look at the price they get it's very nice," he added.

AB InBev will receive $1.62 billion in cash for the Central and Eastern Europe assets. AB InBev will also receive a $448 million unsecured deferred payment obligation from CVC with a six-year maturity that can be extended 2 years, paying interest at between 8% and 15%. Finally, AB InBev will get $165 million in minority interests.

AB InBev will have a right of first offer to buy back the business if CVC wants to sell it in the future. CVC will also brew and/or distribute Stella Artois, Beck's, Löwenbräu, Hoegaarden, Spaten and Leffe -- AB InBev's main brands in Europe -- in the countries where AB InBev is selling those assets, AB InBev said.

The sale comes on the heels of AB InBev's agreement to sell its theme parks business to the Blackstone Group for up to $2.7 billion, including a cash payment of $2.3 billion.