The final step in Asahi Beverages’ acquisition of Carlton & United Breweries from AB InBev has been completed with the Foreign Investment Review Board (FIRB) approving the deal.
Last month the Australian Competition and Consumer Commission (ACCC) said it would not oppose the acquisition subject to a number of conditions (Food & Drink Business, 01/04/2020).
FIRB’s approval is the last in regulatory review process with the acquisition now set to be completed on 1June.
Asahi Beverages chair Peter Margin said CUB will become a business division of the Asahi Beverages Regional Hub within Oceania, along with Asahi Lifestyle Beverages, Asahi Premium Beverages and Asahi Beverages New Zealand.
The sale has been 10 months in the making, with the $16 billion deal originally proposed in July 2019. Asahi said the purchase would bring a broader distribution network as well as great scale when it came to procurement and other business practices. (Food & Drink Business 23/07/2019)
At the time, AB InBev CEO Carlos Brito said the divestiture would go towards paying down debt. It was aiming to reach a net debt to EBITDA target ratio of below 4x by the end of 2020, regardless of the completion of this transaction, Brito said. In 2016, the company bought rival SABMiller, which left it with a US$100 billion debt.
In its 1Q20 results, announced on 7 May, the company recorded a total volume decline of 9.3 per cent with a revenue decline of 5.8 per cent.
It said: “The full impact of the COVID-19 pandemic on our future results remains uncertain. We expect that the impact on our 2Q20 results will be materially worse than in 1Q20 given the widespread social distancing measures and government restrictions currently in place.
“This has already become evident in our April 2020 global volumes, which declined by approximately 32 per cent, primarily driven by the closure of the on-premise channel in most markets and government restrictions imposed on certain operations in connection with the COVID-19 pandemic.”
Asahi to sell cider and beer brands
The ACCC approval required Asahi to sell two beer and three cider brands, with the ACCC having sign-off on the buyer(s).
In December 2019 the ACCC said it was concerned Asahi’s purchase of CUB would reduce competition in the market, saying its preliminary view was that having Asahi as a competitor to the big two brewers (CUB and Lion) may help to keep a lid on beer prices (Food & Drink Business 13/12/2019).
In February it called for industry feedback on Asahi's proposed divestment of some of its cider and beer brands (Food & Drink Business 28/02/2020).
The cider brands Strongbow, Bonamy’s and Little Green cider brands and the Stella Artois and Beck’s beer brands will be sold. Asahi said the cider brands equate to about 20 per cent of the Australian cider market, with Strongbow being about 18 per cent.
ACCC chair Rod Sims said: “Without the sale of five beer and cider brands including Strongbow and Stella Artois, the combined Asahi-CUB company would have accounted for two thirds of cider sales in Australia, and owned the two largest cider brands, Somersby and Strongbow.
“We determined that Asahi selling the beer and cider brands would be sufficient to address our competition concerns and provide an opportunity for another business to play an important role in a relatively concentrated industry.”
Background
In Australia, Asahi’s beer brands include Asahi Super Dry, Peroni, Cricketers Arms, Grolsch, Mountain Goat, and Two Suns. In cider, Asahi licences Somersby cider (from Carlsberg).
CUB’s beer brands include Victoria Bitter, Carlton Draught, Fat Yak, Crown Lager, Foster’s and Balter. CUB also licences and distributes a range of other beer brands including Corona, Stella Artois, Beck’s and Budweiser. CUB’s cider range includes Strongbow, Mercury, Bonamy’s, Little Green, Spring Cider Co., Dirty Granny and Pure Blonde Cider. CUB also manufactures and distributes Bulmers under licence from Heineken.
Asahi Beverages is the Oceania regional hub of Asahi Group Holdings, one of Japan’s leading beverage companies. In addition to the Oceania regional hub, Asahi Beverages comprises of three trading Business Divisions, namely Asahi Lifestyle Beverages which manufactures, markets and distributes a broad portfolio of leading non-alcohol beverage brands, Asahi Premium Beverages which manufactures, markets and distributes a broad portfolio of alcohol products in Australia and Asahi Beverages New Zealand, which manufactures, markets and distributes a broad range of beverage products in New Zealand. Asahi Beverages employs more than 2,100 people across Australia and New Zealand.
