Not in the BBAG

2 May 2003 By Rob Cox Follow @rob1cox

The return on the E1.9bn it is paying for the Austrian brewer will be only 5% even after four years. Unless the Dutch brewer has some cost cuts up its sleeve, this is a bad deal for shareholders.

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Heineken agreed to acquire BBAG, the Austrian brewer with leading market positions throughout Central Europe, for E1.9bn in cash and assumed debt.

Heineken is offering BBAG shareholders, including holding company GeBAG which owns 68.7% of the company E124 a share, a 34% premium to the trading close on April 30.

The Dutch brewer is also acquiring the stake not held by BBAG in its brewing subsidiary Brau Union for E127.27 a share – a 45% premium to the price on April 30. The total equity value of the deal is E1.5bn. The BBAG group has E400m of debt.

Heineken said it will fund the purchase through debt and existing cash resources. The deal will give Heineken No. 1 market share positions in Poland, Austria, Hungary, Romania, Bulgaria, Slovakia, Macedonia and Albania. Brau Union sells beer under the Gosser and Zipfer brands.

Heineken was advised by CSFB and JP Morgan advised BBAG.

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