Heineken NV, the world’s second largest beer maker, has acquired United Breweries Limited (UBL), the country’s largest brewer, cementing its position in a vast market where beer consumption could rise from a low base.
The Dutch brewer announced on Wednesday that it had purchased 3.96 crore shares in UBL, increasing its stake to 61.5 percent from 46.5 percent previously. The acquisition would be worth 5,810 crore based on Tuesday’s close of 1,466.
UBL is the maker of the country’s best-selling lager, Kingfisher, and was owned by businessman Vijay Mallya, who India wants to extradite from Britain over $1.4 billion of loans taken out from banks which authorities argue he had no intention of repaying.
On Monday, the banks took ownership of the stake, and the Competition Commission approved Heineken’s proposed acquisition of additional equity. Heineken has steadily increased its stake in UBL since acquiring a 37.5 percent stake in the company in 2008 through the acquisition of Scottish & Newcastle.
According to Jefferies, India, which accounts for 18% of the global population but only about 1% of global beer volumes, represents a long-term growth opportunity. Traditional beer expansion drivers, such as a young population and economic growth, were in place, but high excise duty meant affordability was an issue. Closing the tax gap between beer and spirits would provide a significant opportunity for the market to grow from its current annual beer consumption of 1.6 liters per capita to the global average of 24.4 liters.