Insight - C&C Group hails Tennent's takeover

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C&C Group has hailed its takeover of Anheuser-Busch InBev businesses in Ireland and Scotland, including the popular Tennent's lager, as a "long-term play" that will significantly enhance the company's value.

C&C Group announced today (27 August) that it would buy A-B InBev's brewing assets in Scotland, Northern Ireland (UK) and the Republic of Ireland for GBP180m (US$292m).

For global brewing giant A-B InBev, the deal is another minor stepping stone on its path to US$7bn of assets disposals.

But for Ireland-based C&C Group, the deal represents a significant broadening of its portfolio, injecting a fresh revenue stream amid ongoing difficulties in the firm's core cider business.

Net sales for the acquired business were GBP162m in calendar 2008, representing almost a third of C&C Group's own annual sales, which came in at around GBP453m in the year to the end of February.

"This is a big business relative to our scale," said C&C Group chief operating officer Stephen Glancey in a conference call on the deal today.

Both he and CEO John Dunsmore described the acquisition, which is to be entirely financed using internal cashflow and current bank debt facilities, as a "long-term play".

Tennent's lager, in a similar vein to Scottish soft drink Irn-Bru, has maintained its local popularity in Scotland against an influx of international beer brands. "Tennent's accounts for one in every three pints bought in Scotland," said Dunsmore, who previously headed up Scottish & Newcastle and joined C&C Group last November to help revive its fortunes.

As well as Tennent's, C&C Group will have distribution rights on select A-B InBev brands, including Stella Artois and Beck's, across the Republic and Northern Ireland and Scotland.

A-B InBev will also offer "transitional services" for 12 months following completion of the deal, which is expected in mid-October if both C&C shareholders and regulatory bodies approve.

C&C said it expects the takeover to be earnings accretive in the first year of operations. Synergies from the deal are expected to total GBP10m by 2012.

The group today reported a 4% sales decline its cider division, which includes Magners in the UK and Bulmers in Ireland, for the first five months of its fiscal year. Cider accounts for around 80% of C&C Group profits, but sales have been in freefall for several years, having failed to recapture Magners' initial explosion onto the UK market.

"Anything that will increase C&C's retail premise, especially on-trade, is a positive," one analyst told just-drinks immediately following today's announcement.

Dunsmore said that, in addition to broadening C&C's portfolio, the move will give Magners and Bulmers better routes to market in Scotland and Nothern Ireland.

C&C Group also owns a spirits and liqueurs business, which includes Tullamore Dew Irish whiskey and Carolans Irish Cream.

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