Molson Coors Taps Emerging Markets

Molson Coors (NYSE:TAP) will buy east European brewer StarBev from CVC Capital Partners for 2.65 billion euros ($3.5 billion) in a deal expected to be accretive to earnings in the first full year of ownership. Molson Coors’ business has until now been concentrated in mature markets like the United States, Canada, and Japan. The deal is expected to give the brewer its first big business in emerging markets.

Molson Coors beat close rival Asahi on Tuesday to buy StarBev. Japan’s Asahi was the early front runner in bidding last week, but the company had only been prepared to pay up to $3 billion for the business, according to sources close to the deal.

The deal is valued at around 11 times StarBev’s core 2011 profit, or EBITDA, of 241 million euros, from annual sales of around 700 million euros. One analyst said, “We did not think the business in many fragmented markets was worth more than 10 times EBITDA or some $3 billion, so this has to been seen as a high price.”

But Molson Coors thought otherwise. “The acquisition of StarBev fits squarely into Molson Coors’ strategy to increase our portfolio of premium brands and deepen our reach into growth markets around the world,” CEO Peter Swinburn said in a statement.

CVC bought StarBev from Anheuser-Busch InBev (NYSE:BUD) in December 2009, and put the business up for sale after it received interest from a number of potential buyers, among them Asahi, Molson Coors, Carlsberg, SABMiller, and Heineken. Though Anheuser-Busch had the “right of first offer,” the company showed little interest.

StarBev has operations in nine eastern European nations, including the Czech Republic, Romania, Bulgaria, and Hungary. Despite recent weakness in those economies, and in most of Europe for that matter, StarBev is still seen as a long-term growth story. Analysts said StarBev was the last major beer asset likely to come up for sale in central and eastern Europe, which is now largely controlled by SABMiller, Heineken, Carlsberg, and Molson Coors.

To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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