In India FosterÆs is selling its brewery in the state of Maharashtra, associated local brands (as well as the FosterÆs brand) to SABMiller for $120 million. FosterÆs group CEO Trevor O'Hoy says: "The value we have achieved through the outright sale of the Foster's brand, together with the brewery and local brands, far outweighs the potential future value of retaining Foster's and continuing to own and operate the business, or pursuing a licence agreement."
For SABMiller the acquisition will add capacity as well as market share. The addition will be significant in Maharashtra (including Mumbai) where FosterÆs brewery is based. SABMiller entered India in 2000 with the acquisition of a small brewery and in 2003 started to consolidate its presence in the country. That year it created a 50:50 joint venture with Shaw Wallace and 2 years later it bought out the 50% stake held by Shaw Wallace.
The consolidation is likely to have the greatest impact on IndiaÆs United Breweries (UB) which owns the Kingfisher brand. UB took a strategic decision not to bid for Foster's suggesting it did not believe the transaction would be value accretive for the company. UB continues to be the market leader in the overall beer segment with a market share estimated at between 45-50%. The acquisition has made SABMiller a strong second in the country. Players in the market are predicting that the small players who constitute the rest of the market will have a harder time now that they have been further marginalised.
Good morning, Vietnam
In Vietnam APB will acquire the FosterÆs breweries as well as associated local brands and will enter a license agreement for the FosterÆs brand at a market royalty rate for a limited term. APB will also produce FosterÆs for export across Asia. The Vietnam transaction has been concluded at $105 million.
APB is a Singapore Exchange listed joint venture between Fraser and Neave group and Heineken. Its brands include the iconic Tiger beer which it launched in the 1930s. APB will consummate the transaction through its wholly owned subsidiary Asia Pacific Breweries (Australia). Indochina (meaning Vietnam and Cambodia) is a key market for APB and for the past three years APB estimates Indochina alone accounted for more than 40% of the groupÆs EBITDA (earnings before interest, tax, depreciation, amortisation).
In June FosterÆs sold its brewery business in China to Suntory, Japan for an undisclosed consideration. China was FosterÆs first Asian foray in 1993 followed by Vietnam and India in the 1997-98 period. On a combined basis the China, India, Vietnam transactions will generate net proceeds of over A$300 million ($229.7 million), FosterÆs said. The Asia transactions along with the earlier sale of the FosterÆs brand in Europe to Scottish and Newcastle are valued at more than A$1 billion and Fosters termed the value thus unlocked ôan outstanding result for FosterÆs group investorsö. Shareholders obviously agreed as Foster's shares gained 1.5% on Friday after the announcement before profit taking, and closed the day 0.5% up.
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