Global drinks giant Diageo has emerged as a surprising contender for acquiring a stake in Karan Billimoria-led Cobra Beer. Sources said Diageo is in fairly advanced discussions with the UK-headquartered brewer to buy about 30% stake for about $100 million.
The India-born international beer company is seeking a valuation of about $400 million. NM Rothschild is advising Cobra on its fund-raising plans, which have also attracted private equity biggies like Goldman Sachs.
However, Diageo is seen as a serious suitor at the moment, sources added. Cobra Beer may decide on a suitor in the next few weeks.
Diageo is the world’s largest drinks company and a predominant player in the spirits segment. But it has substantial interest in the brewing sector with iconic stout beer Guinness and specialty Irish beer Kilkenny.
If the deal goes through, this will be one of the rare instances of Diageo taking a minority exposure in an alcoholic beverage company. Earlier this year, the drinks behemoth took 50% stake in the Netherlands-based super-premium vodka maker Ketel One for $900 million.
Recent UK media reports, quoting financial documents prepared for fund raising by Cobra Beer, said the promoters could look at exiting the company over a 3-5 year time-frame. When contacted, a Diageo spokesperson said the company would not comment on market speculation. Cobra’s top officials in India could not be contacted, while its spokesperson in London declined to comment on speculation.
Initially brewed in Bangalore, Cobra exploded on the London scene as an authentic Indian beer during the early 1990s, riding on the popularity of curry restaurants. It later shifted production to Europe and has made it to mainstream retail in the UK.
Sources said the potential buy would give Diageo an access to the increasingly lucrative trade channel of curry restaurants in European markets. Furthermore, it will bolster Diageo’s distribution portfolio in the Indian market.
Cobra, like Diageo, is pushing ahead aggressively in the local market. Cobra’s domestic volumes crossed 2 million cases last year, accounting for over 20% of its worldwide depletion.
It must be mentioned here that Mr Billimoria has projected India’s expanding beer market as driving Cobra’s growth in the near future. The company’s domestic subsidiary has struck bottling alliances with a slew of independent breweries and also bought Patna-based Iceberg Breweries a few months ago.
Source: Economic Times