Sun Brewing

Sun Brewing (B)

Strategic Alliance

Overview

• SUN Interbrew Limited (SIL) – Leading Russian Beer company • JV: SUN and Interbrew • Alpha Group (Russian Conglomerate) buyout offer • Interbrew offer

– Buyout – Merge with Brazilian Giant AmBev

SUN Group - Khemka

• 1900 – Started as Traders • 1950 – Leading suppliers of iron & manganese ores • 1960 – Leading supplier of capital infrastructure (Esp Soviet partnership) • 1986 – Commercial and investment “SUN” Group • 1990s – Russian FDI into 5 breweries

Interbrew

• 1987 – Merger of 2 largest Breweries • 1990 to 2004 – 30 acquisitions and JV to become global players • 2003 – Need for further deals to consolidate position as well as expansion • AmBev merger – Entry into Latin America and future expansion

SUN + Interbrew

• • Prior to deal:

– SUN group holding in SUN Breweries – 51%

Interbrew contribution:

– $40 mn cash + $90mn assets – Wealth of brewing – Marketing expertise

•

Interbrew gains:

– Expansion of operations – Access to Russian Beer Market

•

Post Deal:

– – – – – Both SUN and Interbrew own 34% Rest 32% Tradable Equal power to veto any future acquisitions Equal representation on board Equal representation in Executive committee

SUN Interbrew

• Growth

– 2 further acquisitions with capital raised – Coherent Branding – Rapid CEO Changes

• Loss of market shares • Top line growth but bottom line declines

– Shift in packing from glass towards cans and PET – Strella impact

• • • • Regained market share Improved financials Cross-brewing Improved operational efficiency and increased capacity

Russian Beer Market

• 5th Largest beer market • 2nd largest in terms of volume growth after China • Four of world’s top brewers produce beer in Russia • Five global brewers account for 36.4% of volume of Russian Beer • Six major independent players account for 28% of volume market share

The Khemka Family Decision (2004)

• Interbrew hold 74.3% while Khemka hold 16.6% – But...