DOMINICAN REPUBLIC/BRAZIL: AmBev buys Cervecería Nacional Dominicana

Brazilian brewer AmBev and E. León Jimenes S.A. (ELJ), which owns 83.5% of Cervecería Nacional Dominicana S.A. (CND), entered into a transaction to form a strategic alliance to create the leading beverage company in the Caribbean through the combination of their businesses in the region, Anheuser-Busch InBev announced on Monday. The combined business will include beer, malt and soft drinks operations in the Dominican Republic, Antigua, Saint Vincent and Dominica, as well as exports to 16 other countries in the Caribbean, the United States and Europe.

Upon closing of the transaction, AmBev Brasil Bebidas S.A. (AmBev Brasil), a closely-held subsidiary of AmBev, and ELJ will be the shareholders of Tenedora CND S.A., a holding company which will own 83.5% of the shares of CND and 100% of AmBev Dominicana S.A. (“AmBev Dominicana”), with AmBev Brasil owning an initial indirect 41.76% interest in CND.

The parties will enter into a shareholders’ agreement with respect to the governance of the holding company, including board representation and voting rights, pursuant to which AmBev Brasil will nominate 5 members of the holding company’s Board of Directors and ELJ will nominate 4 board members, among other provisions. The shareholders’ agreement also provides for restrictions on the transfer of shares and a put and call structure. AmBev will report CND’s results on a fully consolidated basis.

AmBev’s initial indirect interest in CND will be acquired through a cash payment of approximately 1.0 billion USD and the contribution of AmBev Dominicana. The combined entities would have had net revenues of approximately 570 million USD in 2011 and are expected to have an estimated combined EBITDA for the first 12 months of operations of approximately 190 million USD, which implies an EV/EBITDA multiple of approximately 13x.

The transaction is also expected to be EPS accretive in the first year of operations. The closing of the transaction, which is subject to customary conditions precedent, is expected to take place in the second quarter of 2012.

Separately, AmBev Brasil will acquire an additional stake in CND of 9.3%, which is currently owned by Heineken N.V. (Heineken), for 237 million USD at the closing date, at which point AmBev will own a total indirect interest of approximately 51% in CND.

Through this transaction, Heineken monetises its minority investment at an attractive valuation, in line with the price to be paid by AmBev Brasil for the acquisition of a 41.76% stake in CND from the controlling family of the Dominican brewer, the Dutch brewer said.

Closing of the transaction with Heineken is expected to take place in the second quarter of 2012 and subsequently Heineken expects to realise a post-tax exceptional book gain of approximately EUR 130 million.

José A. León, Chairman of ELJ’s board of directors, said: “After thorough consideration and analysis, we have found AmBev to be the ideal partner to enhance CND’s international growth in a fast-changing beverages industry”.

“We have a great deal of respect for the León family, and have been impressed with CND’s people, business, and the strength of its brands. We look forward to building a successful partnership with them”, said João Castro Neves, AmBev’s CEO. “This strategic alliance with ELJ is a key step towards our dream of becoming the leading player in the Caribbean and Central America”, added Alexandre Médicis, AmBev’s VP for Hispanic Latin America (HILA-ex).

Franklin León, President of CND, emphasized: “Since its launch in 1935, Presidente has become a part of Dominican life, culture and tradition. The León family takes great pride in having built CND into what it is today, and having started to take Presidente beyond the Dominican Republic. I truly believe that this strategic alliance will take our business to the next level by giving our people new career and development opportunities, and taking Presidente, and everything it stands for, even further around the world. All this while maintaining our historic and cultural ties to the Dominican Republic and its community.”

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