AB InBev: CVC to put StarBev up for sale?

The Wall Street Journal reported that CVC Capital Partners has received a number of takeover approaches for StarBev, in a deal that couldbe valued as much as $ 3bn.

StarBev is the former Central and Eastern European brewing operations of AB InBev. The business was sold to CVC in 2009 for an enterprise value of approximately $ 2.23bn and additional rights to a future payment estimated to be as much as $ 0.8bn, contingent to CVC’s return on their initial investment.

StarBev has operations in nine countries including Bosnia, Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, Romania, Serbia and Slovakia. Next to a couple of local brands, the company’s flagship brand is Staropramen, sold in over 30 countries. As part of the agreement, StarBev continued to brew Stella Artois, Beck’s, Löwenbräu and Spaten and distribute Hoegaarden and Leffe in the above countries under license from AB InBev.

AB InBev has a right of first offer should CVC decide to sell StarBev. Besides AB InBev, the Wall Street Journal sees SAB Miller, Carlsberg, Heineken, Molson Coors Brewing Co., Asahi and possibly other private equity firms as at least taking a look at the business.

Conclusion:
Although the StarBev business was clearly divested in 2009 for deleveraging purposes, we are not sure whether AB InBev would really want it back. StarBev comprises a variety of countries with each individually a relatively smallsize, and the company typically prefers to focus on its biggest markets where it has significant market share (i.e. US and Brazil). We do believe that some of the other big brewers like Heineken and SAB Miller might be interested in further consolidating their European exposure. No changes to ratings or investment cases on AB InBev and Heineken.