United Breweries joins hands with Heineken to sell more beer

The partnership between UBL and Heineken is expected to drive growth in India, which is considered as one of the world's fastest-growing beer markets

United Breweries Holdings Ltd (UBHL) has said that its unit United Breweries Ltd (UBL) has signed a shareholding as well as distribution agreement with Heineken NV, the world's third-largest brewer by volume after Anheuser-Busch InBev and SABMiller.

In a filing to the Bombay Stock Exchange (BSE), the company said that it has also decided to withdraw the suit filed before the Bombay High Court by the promoter of UBL Group including UBHL against the Heineken Group.

As part of the agreement, Heineken will acquire Asia Pacific Breweries (APB) India—Asia Pacific Breweries (Aurangabad) and Asia Pacific Breweries-Pearl—for €25 million (around Rs174 crore). Following the completion of this transaction, which is expected to materialise in the first quarter of 2010, Heineken intends to transfer these businesses into UBL during 2010, UBHL said.

Heineken will also merge its 50% stake in Millennium Alcobev Pvt Ltd (MAPL), with its joint venture partner, UBL.

Under the distribution agreement, the UBHL-Heineken alliance will sell a portfolio of domestic and international brands, including Kingfisher and Heineken beers to customers in India. Both companies have also agreed upon the key commercial terms to produce the Heineken brand in India. UBHL will simultaneously work with Heineken to expand the international presence of the Kingfisher brand via Heineken's global reach, the release said.

UBL has also appointed Heineken nominee Guido de Boer as chief financial officer. Rene Hooft Graafland, a member of Heineken's executive board and chief financial officer and Siep Hiemstra, regional president of Heineken for Asia-Pacific, were also appointed as non-executive directors on UBL's board.

The Indian beer market is expected to grow to 14.4 million hectolitres in 2009. Beer consumption per capita is currently estimated at 1.3 litres per annum.

UBL reported volumes of 6.4 million hectolitres in 2008-09, a volume growth of 9% that accelerated to a 16% volume growth in the half year ending September 2009 against an industry growth of 8%.

Heineken and Vijay Mallya and his associates jointly hold majority interest of 75% in UBL, India's largest brewer with 48% market share. Heineken holds 37.5% interest in UBL. Mallya and associates also hold 37.5% interest in UBL, with the remaining 25% is held by institutional and common investors.

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