Mumbai: Yet another acquisition play in the international brewing business promises to generate froth in India’s 136-million-cases-a-year beer market.
This time, it is Belgian-Brazilian brewer InBev NV’s $46 billion play for Anheuser-Busch Cos that is likely to pitch two Indian brewers against each other.
That’s because both companies have a presence in India through joint ventures with Indian firms. If the deal goes through, it will violate both joint venture agreements. Both have promised their Indian partners not to partner with any other Indian firm. The merged entity, however, will end up having partnerships with two firms.
While joint venture agreements usually factor in acquisitions, they rarely, if at all, incorporate clauses related to non-compete clauses which may be triggered by these acquisitions.
Anheuser, maker of Budweiser beer, on Wednesday became the target of a takeover play launched by the Belgian company which intends to create the world’s largest beer company by combining the two brewing firms’ worldwide operations.
InBev, which launched its Indian joint venture, InBev India Ltd in May 2007 with the Delhi-based RK Jaipuria group of companies, has a brewery in Andhra Pradesh for its flagship brands Stella Artois, Becks and Bass to cater to the Indian market.
The company is present in at least one market here and is preparing for a nationwide launch. InBev India plans to invest around Rs450 crore.
Anheuser, too, has a joint venture with a local brewer, the Andhra Pradesh-based Crown International Ltd.
The joint venture, Crown Beers India Ltd, has set up a 500,000 hectolitre brewery in Hyderabad and launched two brands, Budweiser and Armstrong, in the local market.
“We haven’t thought of (there being) any adverse impact on us based on the takeover talks, which are still in the preliminary stage,” said a person close to the Crown Beers management.
“Since we strongly believe that the Anheuser family would not allow such a bid to get through, it’s too early to offer any comment on the impact now,” he added, asking that he not be identified. Executives at InBev India could not be reached for comment.
India’s largest beer maker United Breweries Ltd, or UB, in which British beer company Scottish and Newcastle Plc. had a significant stake, faced a similar situation after Dutch brewer Heineken NV bought the UK company in a $15.4 billion deal in January.
UB opposed the parallel business run by the Dutch company in India through its Singapore joint venture Asia Pacific Breweries Ltd. After the Scottish and Newcastle acquisition, Heineken owns a 35% stake in UB.
“Since the Indian ventures don’t form a significant portion of the overall businesses of these global giants, this kind of complication is often neglected while reaching international takeover deals,” said an executive with an Indian beer company who didn’t wish to be identified.
“At the same time, no serious player can ignore the Indian beer market in the long term, considering the sheer size of the population and the current growth rate (around 15% annually),” he added.
As reported by Mint in May, Heineken and United Breweries may work out a deal under which both companies can do business in India.
Heineken holds about 42.5% equity in Asia Pacific Breweries, which directly competes with UB in the local beer market, resulting in UB’s reluctance to welcome Heineken on its board.