E-Malt.com News article: 1578

The Belgian brewing force Interbrew, announced on September 18 the signing of a strategic partnership with Gabriel Sedlmayr Spaten-Franziskaner Bräu KGaA ("Spaten"), which will combine Spaten's beer business with Interbrew Deutschland. The combination will create the largest brewery group in Germany with 15.6 million hectolitres production volumes 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.

The transaction values the combined Spaten and Dinkelacker beer interests at an enterprise value of €477 million (equity value €522 million; €45 million net cash), which is a multiple of 8.9x, the 2003 EBITDA estimate for the brewery group. Based on 2004 performance thresholds for Spaten, an additional future payment of up to €56 million may be triggered, leading to an enterprise value of up to €533 million with a comparable estimated EBITDA multiple, assuming the performance targets are fully met.

The transaction will be executed in three steps: Spaten will 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. Brauerei Beck & Co (Interbrew Deutschland) will acquire the Dinkelacker-Schwaben Bräu business. The transaction is supported by all the family shareholders: the Sedlmayr, Haindl and von Finck families for Spaten and the Dinkelacker and Leicht families for Dinkelacker.

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.

Commenting, 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."

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."

Wolfgang Dinkelacker, CEO of Dinkelacker, added, "The alliance with Interbrew is a win for all parties involved including the Stuttgart community. We have found a good home for our brands within the leading German brewery group. We look forward to a long term, successful relationship."

Germany is a key strategic market. It is Europe's largest beer market and it is consolidating, said Interbrew in a statement. Interbrew's aim is to be market leader - in particular market value leader with a balanced portfolio of outstanding brands. Since its entry into Germany in 2001, Interbrew has built its position to be number two with an 8% market share. It has outperformed market growth, lifted margins and raised the return on its invested capital. Interbrew Deutschland's leading brands include Beck's, Hasseröder and Diebels. It has breweries at Bremen, Issum, Hannover, Braunschweig and Wernigerode and national sales, marketing and distribution structure.

Spaten's and Dinkelacker's brands are leaders in Bavaria and Baden-Württemberg, with market shares of around 11% and 10% respectively. They also reach nationally, especially Franziskaner and Löwenbräu, which have national presence and significant international potential. Franziskaner is growing its sales by 6% a year, twice the rate of the Weissbier segment.

The combination with Spaten means that Interbrew Deutschland will now have leading representation in the six key segments of the German beer market: national premium lagers, national specialities, national core lagers, regional core lagers, regional specialities, and beer-mix.

Spaten is a publicly listed company, quoted on the Munich, Stuttgart and Frankfurt stock exchanges, with 88% of its shares family owned. For its financial year to end September 2003, Spaten's brewing interests, including Dinkelacker, have estimated proforma combined turnover of €357 million and combined production volumes of 4.9 million hectolitres and proforma combined EBITDA of €53.6 million.


19 September, 2003