As Budweiser maker Anheuser-Busch InBev (BUD) - Get Report gears up to sell SABMiller's central and eastern European businesses with an expected tab of up to $6 billion, thirsty private equity buyers could soon start lining up at the bar.
The reason? Strategic investors are seen as a no-go, given the European Commission's tough-as-nails stance on further beer-industry concentration after conditionally approving ABInBev's £71 billion ($104.36 billion) takeover of SABMiller.
On Tuesday, the EC said the world's two top brewers could combine after the Leuven, Belgium-based buyer pledged to sell almost all of SABMiller's European beer business, including in the Czech Republic, Hungary, Poland, Romania and Slovakia.
Put forward at the end of the Phase 1 review, the central and eastern European sales pledges came on top of AB InBev's original offer to sell SABMiller's Peroni, Grolsch and Meantime Brands to Japan's Asahi for €2.55 billion ($2.85 billion). The latter was agreed in February, even before the clock started ticking on the EC's review of the SABMiller deal.
After all the disposals are completed, SABMiller will be left with only one brewing operation in Europe, on Spain's Canary Islands. (Elsewhere in the region, SABMiller is active through import businesses in Sweden and Switzerland, as well as exposure to Ukraine and Russia through its 24% stake Anadolu Efes, of Turkey.)
With Lazard's help, AB InBev will auction Dreher Breweries in Hungary, Kompania Piworska in Poland, Plzensky Prazdroj in the Czech Republic, Pivovary Topvar in Slovakia and Ursus Breweries in Romania.
The assets are seen fetching between $5 billion and $6 billion. KBC Securities analyst Wim Hoste views a $5 billion price as "realistic" given that they generate "significantly" higher Ebitda than SABMiller's Western European assets being sold to Asahi. An AB InBev spokeswoman said via email earlier this week that the company expects "strong interest for the attractive assets."
By process of elimination, buyout shops are seen as the most likely suitors.
Even if they wanted to, Heineken and Carlsberg, the world's No. 3 and No. 4 brewers, respectively, would be unlikely to step forward after the EC's demand of additional concessions from AB InBev on SABMiller. The EC also noted that the AB InBev tie-up with SABMiller brings together the third and fourth-largest brewers in Europe, behind Heineken and Carlsberg.
Trevor Stirling, an analyst with Bernstein in London, noted that EC regulators are on the antitrust warpath.
EU competition chief Margrethe Vestager "has displayed this in telecoms, and she's taking the same attitude in beer. For any of the major European brewers to take the business on is not realistic."
Particularly in Poland, Carlsberg and Heineken would have "significant" competition issues, he said.
Nor does Stirling see Japanese buyers coming forward, as Ashahi is already buying Peroni, Meantime and Grolsch, and Kirin's hands full as well with previous acquisitions. "Then you're really down to private equity," which generally likes businesses like beer with a stable cash flow.
Likely suitors include KKR (KKR) - Get Report , BC Partners and CVC Partners, all of whom have been beer-industry investors in the past, PAI Partners, Bain Capital, Advent International and Jacobs, the Zurich-based investment group that owns 50.1% of cocoa and chocolate supplier Barry Callebaut.
As for those looking to make a splash back into the beer business, two have fairly recent experience that could work in their favor: Two years ago KKR and Affinity Equity Partners sold South Korea's Oriental Brewery back to AB InBev for $5.8 billion, nearly five years after buying it for less than a third of the price.
And in 2012, CVC Capital Partners sold Czech brewer StarBev to Denver-based Molson Coors Brewing (TAP) - Get Report for more than €2.65 billion. The deal came a little more than two years after CVC gulped down AB InBev's central and eastern European assets, following Belgian brewer's InBev's $52 billion takeover of Anheuser-Busch in 2008.
So in other words, don't be surprised to see old drinking buddies clinking glasses in AB InBev's next round of asset sales.