Belgium’s Interbrew has signed a strategic partnership that will see it combine its German division with Bavaria’s leading brewer Gabriel Sedlmayr Spaten-Franziskaner Bräu KGaA (Spaten), creating the largest brewery group in the country.
The deal is initially valued at €477m. However based on 2004 performance thresholds for Spaten, an additional future payment of up to €56m may be triggered, leading to an enterprise value of up to €533m.
The new combination will have a annual production of 15.6m hectolitres and an 11% share of the German beer market.
The transaction is subject to shareholders’ and regulatory authorities’ approval and is expected to close in the second half of 2004.
John Brock, CEO of Interbrew said: “This is the right deal, at the right price in a key market. Germany is the third largest beer market in the world and it is consolidating. Since 2001 Interbrew has built a leading presence in this market with progressively increasing volumes, margins and return on capital. With this transaction, we strongly expand and reinforce our position, become the market leader, enter the important Weissbeer segment and create further significant growth synergies. It meets all the criteria we have set for ourselves for value creating acquisitions.”
Interbrew up until today had been the second largest brewer in Germany with an 8% market share, including brands such as Beck’s, Hasseröder and Diebels.
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However, the group said that there were two areas it needed to reinforce: presence in the fast growing Weissbier segment, and greater strength in South Germany.
“Combining Spaten’s brewing interests with Interbrew Deutschland fills these gaps and provides a powerful platform for additional cross-selling, top line volume growth and further margin improvement,” Interbrew said in a statement.
Headquartered in Munich, Spaten is the leading brewer in Bavaria and its majority-owned subsidiary Dinkelacker is a leading brewer in Baden-Württemberg. Its brands include Franziskaner, a premium Weissbier; Spaten and Löwenbräu.
As well as its brewing operations, Spaten has a substantial real estate business, on which it wishes to focus. The strategic partnership with Interbrew, the statement said, enables Spaten to make that transition.
The deal will see Spaten spin-off the Spaten-Franziskaner brewing activities into a separate legal entity. These activities, plus Löwenbräu brewing, will be contributed to Interbrew Deutschland in exchange for a 13% share in the enlarged equity of Interbrew Deutschland.
Meanwhile, Brauerei Beck & Co (Interbrew Deutschland) will acquire the Dinkelacker-Schwaben Bräu business.
The transaction values the combined Spaten and Dinkelacker beer interests at an enterprise value of €477m (equity value €522m; €45m net cash). Based on 2004 performance thresholds for Spaten, an additional future payment of up to €56m may be triggered, leading to an enterprise value of up to €533m.
In addition, Sedlmayr Treuhandgesellschaft, owned by the Sedlmayr family, has announced it is acquiring the von Finck family’s shareholding in Spaten. Interbrew has agreed to acquire up to 100,000 shares, equivalent to some 29% of the issued limited share capital of Spaten for a consideration of up to €200 million. This is expected to take place in March next year. Thereafter, Interbrew will retain these shares for up to 18 months. During this period, the return for Interbrew on this element of the agreement makes it EPS neutral.
Dr. Jobst Kayser-Eichberg, CEO of Spaten said: “Spaten has taken the fundamental strategic decision to increasingly focus in future on its property investment and development business. Key to enabling us to take this step has been to find the best new parent to cherish and develop our leading beer-business. Interbrew has the ideal culture, global scale and complementarity of position in Germany. I am absolutely confident that Spaten’s brands will flourish through this partnership, thereby also benefiting Munich and the wider Bavarian communities.”
