ITALY: SABMiller wins race for Peroni
SABMiller will take an initial stake between 51% and 60%. Assuming the acquisition of a 60% interest, SABMiller's initial cash investment will be €246m, valuing 100% of the equity of Birra Peroni at €410m.
The precise shareholding will be determined on closing of the transaction, depending upon the level of acceptance of the offer above the agreed 51%. Taking account of net debt of €153m, the enterprise value of the transaction is €563m.
SABMiller said it had agreed put and call options, which, when fully exercised, will result in SABMiller increasing its shareholding in Birra Peroni to between 80% and 100% over a three to five year period.
Funding of the transaction will be through existing debt facilities, and it is expected that the acquisition will be earnings positive in the second full financial year. Based on the total enterprise value, the earnings before interest, tax, depreciation and amortisation (EBITDA) multiple is 12.6.
Subject to the achievement of demanding domestic performance targets in 2003, a further payment of up to €25m ($28m) will be made, pro-rata to all shareholders. If these performance targets are met, the effective EV/EBITDA multiple would fall to 10.6 or less, reflecting the underlying earnings growth, SABMiller said.
The transaction is not subject to any conditions and closing is expected within three weeks.
SABmiller said it expects cost savings from operational synergies and best operating practices of no less than €9m by the end of the third full financial year.
Birra Peroni holds a strong number two position (25.2% share) in the growing Italian beer market, with 2002 revenues of €494m ($560m) and adjusted EBITDA of €44.8m ($50.8m). Its brands include Peroni, the number one beer in Italy, and Nastro Azzurro, the number three brand in the premium segment
SABMiller said that the two businesses had a good portfolio fit, providing cross-selling opportunities for SABMiller brands into Italy and Birra Peroni brands into selected SABMiller markets.
The Italian business will be managed as part of SABMiller Europe, where beer volumes would be 27 million hectolitres representing 21.8% of total SABMiller volume (based on SABMiller F02 volumes).
Graham Mackay, Chief Executive, commented: "This transaction represents a further step in developing SABMiller's strategy. Birra Peroni has an outstanding reputation and heritage, and a leading brand portfolio, including Peroni and Nastro Azzurro. Italy is one of only two Western European markets to be experiencing real volume growth, at some 3%, well ahead of the regional trend.
"Our entry into Italy, Europe's seventh largest beer market, combines a leading in-country position with strong potential for Birra Peroni brands in international markets. We also believe that there are opportunities for us to enhance the value of Birra Peroni through the application of operational and brand expertise, proven in our other European businesses.
"The acquisition creates cross selling opportunities for us and our new partners. Italy's strong and growing import market offers potential for Pilsner Urquell and other SABMiller brands, while Birra Peroni brands will enhance our global portfolio."
Marco Martinelli, chairman of Birra Peroni Industriale, said: "Birra Peroni is delighted to be joining the SABMiller group, so becoming part of one of the world's leading brewers. I strongly believe in the exciting growth prospects of Birra Peroni and of our core brands, Peroni and Nastro Azzurro. The combination of Birra Peroni and SABMiller management in Italy will ensure the continued success and goodwill of the company.
"After five generations, Birra Peroni's resulting widespread ownership is proud to welcome SABMiller as a strong partner in the next stage in the natural evolution of Birra Peroni's corporate life."
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