C&C shares rise 15% on €205m diversification plan

SHARES IN drinks group C&C rose 15 per cent yesterday after it announced a plan to diversify with a €205 million purchase of the Scottish and Irish businesses of Anheuser-Busch InBev (ABI).

The deal will see C&C take control of Tennent’s, the best-selling larger in Scotland and its Wellpark brewery in Glasgow. It has also secured a 20-year distribution agreement for ABI beer brands including Stella Artois and Becks.

Tennent’s is Scotland’s leading lager brand, accounting for 55 per cent of lager sales in pubs.

It also has a 12.5 per cent market share in Northern Ireland, although sales in the Republic and England are weak.

At the end of 2008, the acquired assets had sales of £162.3 million and normalised Ebitda of £21.8 million. C&C said that the acquisition was expected to immediately boost earnings per share and deliver cost savings and revenue synergies of £10 million per annum by 2012.

C&C chief executive John Dunsmore said that the synergies would be evenly split between costs and revenues, but would not result in job losses.

The acquired business employs around 300 people and the purchase effectively doubles the size of C&C’s production volume.

Mr Dunsmore said that C&C was “buying an iconic brand in Scotland and a successful brand in Northern Ireland” that would also strengthen its cider business by providing additional routes to market.

C&C was evolving from a single brand company in each market into a portfolio business, he said.

The acquisition is in keeping with the firm’s stated strategy of becoming a manager of alcoholic drinks brands in international markets.

Chief operating officer Stephen Glancy told analysts on a conference call that C&C would concentrate on extending sales of Tennent’s in England and its existing markets of Scotland and the North rather than in the Republic.

The purchase is subject to shareholder and regulatory approval and will be funded internally and with bank loans.

Of the purchase price, £153 million will be paid on completion, with the remainder deferred until September next year.

C&C also said that full-year operating profit would be at the top end of a previously stated guidance range of €77 – €82 million despite a 5 per cent fall in revenues in the five months to the end of July.

Cider revenues fell 4 per cent in that period, while spirits and liqueurs fell 22 per cent. Bulmers’ sales volumes rose 3 per cent as a marketing campaign helped to offset the impact of a wet July.

ABI has been selling assets to pay down debt from the $52 billion (€36.4 billion) merger that formed the company last year. It has now raised just over half of its own target of $7 billion by November by selling assets in Korea, China, the US and now Scotland.

In a note to investors, Davy Stockbrokers said the deal should add around 10 per cent to full-year earnings per share.

In the short term, the deal strengthens C&C’s distribution, brand portfolio and production while over the medium term it may “present opportunities in existing and new markets in collaboration with ABI”.

C&C shares closed at €2.58, a gain of 15.6 per cent, giving the company a market capitalisation of €850 million. The stock has risen 78 per cent this year.