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Monday, 20 January 2014

AB InBev has regained Oriental Brewery for $ 5.8 billion

CEO of the world's largest beer producer Anheuser-Busch InBev (AB InBev) Carlos Brito decided to buy for $ 5.8 billion Korean company Oriental Brewery, which he himself had sold three times cheaper than in 2009. The main reason for the sale and purchase of Oriental Brewery - the desire of top management of AB InBev get big bonuses, some analysts believe.

AB InBev, which produces more than 200 different brands of beer sold Oriental Brewery for $ 1.8 billion investment funds KKR & Co. and Affinity Equity Partners in 2009. At first glance it might seem that buying back Oriental Brewery, Carlos Brito actually acknowledged his strategic miscalculation. "The deal seems strange, since they pay for Oriental worth three times more than that for which sold the company five years ago" - quoted by Bloomberg Liberum Capital analyst Pablo Zuanik. According to him, the main reason for the deal was not so much the growth of the beer market in Korea as the company's desire to increase its stake in the country and increase the popularity of brands Budweiser and Corona. Over the past years, Oriental Brewery has significantly strengthened its position in the Korean market, increasing its share from 40 to 60%.

Nevertheless, as the sale and repurchase of Oriental Brewery were not a mistake, but part of a long-term strategy Carlos Brito, writes The Economist. In 2008, InBev acquired Anheuser-Busch for $ 52 billion, which is why, at the end of the year, AB InBev debts amounted to 56.6 billion dollars As a result of the absorption Brito and 40 other executives received stock options 28.4 million shares. However, to sell half of their shares, they could only be corrected if the company's financial performance: at the end of 2013 the ratio of net debt to EBITDA ratio should drop to 2.5.

Brito was able to successfully cope with the task. At the beginning of last year's debt amounted to $ 30.1 billion already largely achieved such success CEO thanks to extensive sale of assets - in total, the company got rid of the property value of $ 9.4 billion since 2008 the company's shares rose almost six-fold, and price of a security is now U.S. $ 101.47 Thus, the total amount of the bonus Brito valued at approximately $ 289 million, and all top managers together - $ 2.5 billion in second half of the shares Brito and other executives only be able to sell in 2019.

Now that Brito secured bonuses, he decided to return the company lost assets, says The Economist. AB InBev reserves the right to repurchase the Korean manufacturer of beer on a pre-agreed terms and conditions for five years. Buying Oriental Brewery not be a big burden for the company - even after the transaction and the net debt to EBITDA will be lower in February 2015. At the same time, the acquisition will increase the presence of AB InBev in the Asia-Pacific region. Last year, they accounted for only one seventh of the total volume of beer sold by AB InBev. Oriental Brewery strengthen our position in the fast-growing Asia-Pacific region. There it will represent a significant portion of our sales, "- said in a statement Carlos Brito. It is expected that the beer market in Korea will increase by 13% in the period from 2012 to 2022. Purchase AB InBev - the second major deal in the alcohol market since the beginning of the year. Last week, the Japanese company Suntory Holdings acquired Beam bourbon producer for $ 16 billion

The Shares of AB InBev in U.S. market closed Friday at $101.47, down 1.9% for the session.

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