Molson Coors Brewing Company is betting on growth rather than traditional synergies from its acquisition of StarBev for USD 3.54 billion.
According to Peter Swinburn, Chief Executive Officer of Molson, “This is a deal about growth, rather than synergies.”
Molson is widely present in the United States of America and Britain. It has been looking for foray into other markets to sell its beer brands. Becoming a global brand, the goal of Molson will come to life with the acquisition of StarBev.
Headquartered in Prague, Czech Republic, StarBev has brewing operations in the Czech Republic, Hungary, Bulgaria, Romania, Croatia, Serbia and Montenegro. StarBev is the market leader in almost every country where it is present.
The acquisition of StarBev will enhance its reach in the Eastern and Central Europe and thereby, result in the growth of the company.
The strong portfolio of StarBev including brands like Staropramen, Borsodi, Kamenitza, Bergenbier, Ozujsko, Jelen, Niksicko amidst others. Owing to strong brand popularity of StarBev, Molson will not need to focus on brand awareness.
“It has a brand position that’s really attractive and it is a market structure we recognize,” Swinburn said. Molson certainly feels like this is a marriage made in heaven.
The acquisition will start adding to the bottom line of the company from the first year of joint operations. Molson is betting heavily on the deal to start throwing a lot of free cash, as it is funding the payment almost entirely through debt. Molson will pay USD 3 billion in a blend of cash and debt, while USD 667 million worth of convertible debt would be issued to CVC Capital Partners.
Swinburn was confident that the terms of the deal will help the company report higher growth as he said, “For companies with our position, the debt market is there.” The shareholders would certainly benefit from the deal if the company is able to manage its debt and interest payments without dilution of shareholder’s equity.