Dec 05, 2018
J.P. Morgan has led Heineken’s $3.4 billion expansion in China as the country acquires a growing thirst for premium beers.
The Dutch company has announced a binding agreement to acquire a 40% stake in China’s top brewer enabling it to reach all corners of the world’s largest beer market.
The acquisition comes as China opens up consumer markets to cater for the changing tastes of its expanding middle class.
Heineken has had manufacturing operations and brand presence in China for decades but without a well-developed route to market.
“It is a great combination,” says Camillo Greco, global head of Consumer Investment Banking. “Heineken has a prestigious premium brand but has historically lacked extensive distribution in China. This deal pairs the No.1 premium brand with China Resources Beer, the top distributor, which until now has lacked a premium beer.”
Heineken approached J.P. Morgan for support with the deal on the back of a continuous coverage effort. The complexity of the multiple agreements meant it has taken a number of months for the parties to sign a binding agreement.
To build trust, most meetings were held face to face, demanding numerous 12- hour flights between Amsterdam and Hong Kong and making progress logistically challenging.
Under the terms of the deal, Heineken will combine its operations in the country with those of China Resources Beer and license its brand to the Chinese partner on a long-term basis. Heineken will also have a seat on the board.
“This transaction gives Heineken not just royalty from the use of its brand in China, but a significant economic position in the long-term growth of the beer market through a stake in the largest local player,” explained Rohit Chatterji, co-head of M&A in Asia Pacific. “It also gives them better control over how the brand is positioned and used.”
Peter Kerckhoffs, senior country officer for the Netherlands, added: “As the largest inbound strategic acquisition by a European brewer into the Chinese beer market in the last decade, this deal had huge visibility in the industry and the Netherlands. As strategic advisor, we were proud to support Heineken on this highly structured transaction.”