The Leuven, Belgium-based world’s largest beverage company carried $53.14 billion of net debt at the end of the second quarter. Now AB InBev is seeking to cut its net debt-to-operating profit ratio from 4.2 to below 2.5 by 2013.
InBev sheds Central European assets
The group, created last year following the $52 billion takeover of Anheuser-Busch of America by InBev of Belgium, said Thursday that it would sell its breweries in nine eastern European countries to CVC Capital Partners.
The private equity firm CVC is paying an initial $2.23 billion for AB InBev's operations in Bosnia-Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Montenegro, Romania, Serbia and Slovakia.
“The acquisition marks the first investment in the region for CVC,” Istvan Szoke, head of central and eastern Europe at CVC, said in a statement Thursday, adding that the new unit would be named StarBev.
The two groups said that the price tag could rise to $3.03 billion depending on the private equity firm’s return on investment.
The asset sales would help AB InBev to pay down debt from the takeover, and the brewer has more than met its goal of reducing its debt by $7 billion over the last 12 months.
"We are pleased to announce this transaction which enables us to exceed our stated commitment to achieve $7 billion in divestitures," said AB InBev Chief Executive Carlos Brito.
CVC’s mode of payment
CVC’s initial payment to AB InBev is made up of $1.62 billion in cash, part funded from a $1 billion senior debt facility, with the balance in the form of a $448 million deferred note and $165 million of minority interests.
Luxembourg-based CVC will pay a further sum of up to $800 million depending on the return on its initial investment, and AB InBev will retain the right to re-aquire the business if CVC decides to sell it up in the future.
The deal, set to close in January, gives CVC license to brew and distribute AB InBev’s brands like Stella Artois, Beck’s, Löwenbräu, Hoegaarden, Spaten and Leffe.
Shedding assets to pay down debt
InBev borrowed $45 billion when it acquired U.S. rival Anheuser-Busch last year in November for $52 billion; since then, it has been shedding assets to help pay for its debt.
Last week, AB InBev said it would sell its theme parks, including the three SeaWorlds and two Busch Gardens across the country, to private equity firm Blackstone Group in a deal worth about $2.7 billion.
In May, the Belgium brewer agreed to sell Oriental Brewery, its South Korean subsidiary, to Kohlberg Kravis Roberts for $1.8 billion. In that deal, too, AB InBev retains the right of buying back the assets if they are ever put up for sale.
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