U.S. and European buyout funds are gearing up for SABMiller‘s (SAB.L) sale of its central and eastern European beer brands, with some seeking to join forces to snap up assets worth up to 7 billion euros ($7.7 billion), sources familiar with the matter said.
The brewing businesses, based in the Czech Republic, Poland, Hungary, Romania and Slovakia, are for sale as part of Anheuser-Busch InBev’s (ABI.BR) $100 billion-plus takeover of SABMiller, which has come under a shadow of doubt as activist shareholders push for a higher price in light of weak sterling.
AB InBev, maker of Budweiser and Stella Artois, has offered to sell SAB’s entire European business to ease antitrust approval for the takeover, which is among the largest in corporate history.
The sale, led by Lazard on behalf of AB InBev, is expected to kick off toward the end of September, the sources said, cautioning that AB InBev wants to finalize the SABMiller takeover before starting negotiations for the brands, which include Czech market leader Pilsner Urquell.
AB InBev is expected to consider bids for all of SAB’s central and eastern European portfolio and avoid a break-up of the assets which would result in a piecemeal sale.
European private equity fund Advent has been conducting preliminary work for several months and has emerged as one of the most determined suitors for the brands, the sources said.
Advent, which raised $13 billion for its latest fund in March, has the financial muscle to bid alone, the sources said, pointing to a previous joint investment in Romanian brewer Miercurea Ciuc in 1996.
Others need to team up in bidding consortia to match AB InBev’s price expectations, they said.
AB InBev, SABMiller and Advent declined to comment.
Activist shareholders have been buying into SAB shares in recent weeks, hoping to benefit from a higher cash offer from AB InBev, after the fall in the sterling made the cash offer look less attractive than a special cash-and-stock offer aimed at two large shareholders.
Private equity funds are keen to invest in central and eastern European beer brands as alcohol consumption in these markets remains strong, offering scope for growth.
Pilsner Urquell, for example, has about a 40 percent share of the Czech beer market which has the highest per-capita consumption in the world.
Other brands on the block include Dreher in Hungary, Tyskie and Lech in Poland, Ursus in Romania and Topvar in Slovakia.
The divestiture, valued at 5 to 7 billion euros, has drawn interest from some central and eastern European investment outfits including Mid Europa Partners, which is on the lookout for a bidding partner, the sources said.
Czech family office R2G is also seeking to be part of a bidding alliance and is talking to prospective bidders in an effort to submit a competitive offer, one of the sources said.
R2G declined to comment while Mid Europa wasn’t immediately available for comment.
Mid-sized investment firms are discussing their options with some bigger Western funds including U.S. buyout funds KKR (KKR.N) and Bain Capital as well as European funds BC Partners and PAI Partners, the sources said.
But Japan’s Asahi Group Holdings, which trumped private equity bids for Peroni, Grolsch and Meantime in February, may stand in their way again, having shown interest in AB InBev’s central and eastern European disposals.
Asahi, Japan’s biggest brewer, seeks growth outside Japan, where a shrinking population and the increasing popularity of wine have weighed on beer sales for two decades.
But it may need to wait until it completes its proposed 2.55 billion euro purchase of Peroni, Grolsch and Meantime before moving to the next target, the sources said.
Asahi, KKR, BC Partners and PAI declined to comment while Bain Capital was not immediately available for comment.
Meanwhile Czech investment firm J&T has also signaled interest in making a bid although its main focus is on Pilsner Urquell, another source said.
J&T, which declined to comment, is partly owned by China’s CEFC fund, which snapped up a smaller Czech brewing group, Pivovary Lobkowicz, in 2015.