Efes to lay out $390 million for minor Russian brewer

MOSCOW (Reuters) – Turkey’s Efes Breweries International said yesterday it had signed an agreement to buy 92.3 percent of one of Russia’s last big independent brewers, Krasny Vostok, in a deal valued at about $390 million. The acquisition, subject to regulatory approval, would boost Efes’s share of the fast-growing Russian beer market to more than 10 percent and cement its fourth place in an industry where foreign players have snapped up most of Russia’s big brewers. Analysts said the acquisition looked cheap in terms of the production capacity of Krasny Vostok – which means «Red East» in Russian. The London-listed shares of Efes Breweries International, which is 70 percent-owned by Turkish-based Anadolu Efes, rallied 11.6 percent to $36 by 1440 GMT. Krasny Vostok has a 3 percent share of the Russian beer market by volume. Its annual brewing capacity is 10 million hectoliters and it operates two breweries in Kazan in central Russia and in Novosibirsk in Siberia. «If we take the brewery’s capacity, this is the lowest price possible,» said Yelena Borodenko, sector analyst at Alfa Bank in Moscow. The deal values Krasny Vostok at $39 per hectoliter of capacity – less than a third of the price paid by Belgium’s InBev «INTB.BR» for Russian premium brewer Tinkoff last summer. «(The acquisition) will enable us to solidify and build on our fourth position within the dynamically consolidating (Russian) market through increased capacity, extensive geographical coverage, lower cost base and higher sales volume,» CEO Ahmet Boyacioglu said in a statement. New capacity While picking up a bargain in terms of capacity, Efes paid a relatively high price for Krasny Vostok’s struggling ongoing business, which relies heavily on downmarket brands and ran at only 30 percent of capacity last year, analysts said. «The purchase price seems a bit expensive, looking at it on the basis of sales. However, Krasny Vostok adds value to Efes geographically. The company particularly wanted to open up in the east of Russia,» said EFG Istanbul analyst Osman Memisoglu. «Even if it appears that on a sales basis, Efes has paid a bit too much money in the short term, we think it is positive for the company in the long term.» Efes said the acquisition would increase its annual brewing capacity in Russia to 18 million hectoliters. The deal puts an enterprise value, or combined equity and debt, on Krasny Vostok of $390 million. An Efes source said the transaction included $50 million in assumed debt.

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