Comment - CVC Capital to Offload StarBev?
CVC Capital has received takeover interest in StarBev
Dwindling acquisition opportunities and an anticipated rebound in Eastern Europe beer sales make StarBev an attractive bet for the future, but it looks too early for a deal.
To paraphrase a friend of mine, it's always good to know that someone wants a piece of your bottom. The proper phrasing is a little more lewd. But, on this basis, CVC Capital has no shortage of interest in its StarBev operations.
I understand that there is no formal sale process in place, but CVC appears quite happy to flutter its eyelashes provocatively at the beer sector.
Selling beer in Eastern Europe has proved a thankless task in the global economic downturn. Yet, there is a suggestion the brewing world may be so starved of acquisition opportunities that companies are willing to take a punt on markets that shouldn't stay in the doldrums forever, based on demographics and past experience.
SABMiller's Europe MD said this week that per capita consumption in Central & Eastern Europe probably will rebound, but not at the same pace of growth seen prior to Lehman Brothers' collapse.
This followed a note from Sanford Bernstein analysts last month, which said of Central & Eastern Europe: "With just above 50 litres of beer per capita, we are still at significantly lower levels of consumption than in Western Europe and North America which are close to 70 litres per cap."
While they wait, brewers already operating in Eastern Europe are cutting costs amid weak consumer spend and excise tax rises. The added bonus of so-called in-market synergies from a StarBev acquisition, then, might be on the minds of some.
If I had to call it today (23 February), though, I would say that it's too early for a deal. CVC has only had the assets for two years, after paying Anheuser-Busch InBev an initial US$2.2bn for them in late 2009. Much of 2010 was spent on strategy building, with 2011 the first opportunity to begin implementing this strategy across a whole fiscal year.
Added to this, StarBev's CEO, Alain Beyens, told me in an interview late last year: "There is clearly no agenda or timeline on a potential sale of the business by CVC." Of course, he conceded that private equity ownership has a finite lifespan.
StarBev's key asset, Pivovary Staropramen, has raised a few eyebrows early in 2012. In the 12 months of 2011, it reported own-beer sales up by 8% in volume on the previous year, with domestic sales up 9% in a flat Czech beer market. Net sales figures were not given, so the effect of pricing is not known.
As part of the sale of the business to CVC, Anheuser-Busch InBev negotiated "a right of first offer to reacquire the business should CVC decide to sell in the future". In other words, for others to get involved, they must either compete on price against the world's largest brewer, or A-B InBev must state its intention to stand aside.
A-B InBev, then, is in the driving seat. For now, though, it seems to have enough on its plate to steer the core US business out of trouble, fend off fresh competition in Brazil and Russia, and expand its reach in China.
Interest from elsehwere - Japan, perhaps? - might force A-B InBev to 'put up or shut up' sooner that it would like. But, from what I understand, CVC is not actively soliciting offers.
There's no harm in flirting, however.
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