In a complex arrangement, Heineken will acquire Asia Pacific Breweries (APB) India and subsequently transfer this to UB in 2010. Consequently, both companies will withdraw their litigations against each other. UB shares rose 4.7% on the BSE on Monday to close at Rs 191.50 as investors welcomed the truce.
Heineken, the worlds third-largest brewer, has a 37.5% stake in UB, while Vijay Mallya and his associates have a matching shareholding. The remaining 25% is held publicly. Heineken inherited the stake after it bought (jointly with Carlsberg AS) UBs long-time partner Scottish & Newcastle in January 2008.
UB filed a suit in the Bombay High Court last year seeking termination of the special rights and privileges granted to Scottish & Newcastle, arguing conflict of interest. Heineken has a stake in Singapore-based APB, which markets the well-known Tiger beer brand in India in direct competition with UBs Kingfisher.
Following Mondays UB board meeting, Heineken nominee Guido de Boer has been appointed CFO, while Ren Hooft Graafland and Siep Hiemstra have been appointed non-executive directors. Moreover, Heineken will acquire for an equity value of 25 million euros, APBs existing Indian investments: Asia Pacific Breweries (Aurangabad) Pte Ltd and Asia Pacific Breweries-Pearl Pte Ltd.
Subject to regulatory approval, these acquisitions should be completed in the first quarter of 2010. Heineken intends to subsequently transfer the businesses in UB, which is likely to brew and distribute domestically APBs beer brands, which include Tiger and Cannon, next year. In 2009, the Indian beer market is expected to grow to 14.4 million hectolitres. Beer consumption per capita in India is currently estimated at 1.3 litres per annum. UB has a 48% share of the Indian market.
Commenting on the agreement, Mallya said, Heineken is among the most respected and recognised names among beers all over the world. The combination should help UB to further its leadership position in the years to come. However, Mallya refused to share financial details of the deal.
Heineken also intends to merge its 50% holding in Millennium Alcobev Pvt Ltd with UB, which holds the remaining 50%. This was the joint venture through which Scottish & Newcastle first invested in India in 2004 and has been managed as part of UB.
Jean-Franois van Boxmeer, chairman of Heinekens executive board and CEO, said, In the world of beer, there is no bigger or more exciting growth opportunity than India. We have long regarded a strong Indian presence as important in order to increase our exposure to and growth from developing markets. Our partnership and the combination of the Kingfisher and Heineken brands will transform our ability to unlock the markets considerable potential and to shape the premium segment.