AmBev Boosts Expansion with Dominican Buy

Companhia de Bebidas das Americas (AmBev) has agreed to spend $1.24bn to acquire a 51% position in Cerveceria Nacional Dominicana (CND), the largest brewer in the Dominican Republic, it says, through 2 deals seen as AmBev gaining another local brand with expansion potential. AmBev has agreed to pay $1bn cash to form a joint venture with CND parent E Leon Jimenez (ELJ), which owns 83.5% of CND, giving the international group a 41.76% indirect stake in the brewer of the iconic Presidente brand. Separately, AmBev has agreed to pay Heineken $237m for the Dutch brewer’s 9.3% interest in CND, giving AmBev a total 51.06%of CND. “This isn’t cheap, but it is focusing on the potential of the market, plus synergies. There is a potential to take the brand to other markets,” says a New York-based beverage analyst, noting the implied13x enterprise value/Ebitda given by Ambev is at the high end of the range but not expensive. Though the Dominican Republic is not a large market, the analyst also points to AmBev’s strong track record at capturing synergies and taking local brands regional or global. Analysts point to a 12x-13x average multiple for EM M&A deals in the sector, noting that LatAm assets tend to be at the expensive end due to strong growth potential. “This is a defensive move, to keep other international companies from taking LatAm market share,” says a Brazil-based analyst. AmBev says the transaction should be earnings per share accretive in the first year of operations. CND will continue to operate under its own name, with Franklin Leon as president and Alexandre Medicis as CEO. The parties will enter into a shareholders’ agreement, in which Ambev will nominate 5 members to the holding company’s board and ELJ will nominate 4, among other provisions. The combined operation will sell beer, malt and soft drinks in the Dominican Republic, Antigua, Saint Vincent and Dominica, as well as export drinks to 16 other countries. Deutsche Bank and Lazard advised AmBev, while Bank