By Sarah de Sainte Croix, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL – Brazilian beverage giant, Ambev, announced on Monday that it had entered into a strategic alliance with the Dominican Republic’s biggest company, E. Leon Jimenes SA (ELJ), to form the leading beverage company in the Caribbean. Their combined business operations will include beer, malt and soft drinks in the Dominican Republic, Antigua, St. Vincent and DR, as well as exports to sixteen countries throughout the Caribbean, the U.S. and Europe.
The deal unites two titans of the Western Hemisphere’s beverage markets. ELJ is headquartered in Santiago de los Caballeros, owns 83.5 percent of the Dominican National Brewery (CND), and holds a virtual monopoly on local beer and cigarette markets. It brews Presidente, Bohemia, Miller and Heineken beers and manufactures Marlboro cigarettes.
Ambev (Companhia de Bebidas das Américas – or ‘Americas’ Beverage Company’) dominates Brazil’s beverage industry, producing beers and soft drinks ranging from Brahma and Budweiser, to Guaraná Antarctica and Pepsi. It is also a founding partner, alongside Belgium’s Interbrew, of InBev – one of the world’s top two leading beer manufacturers.
According to a press release by Ambev, “The deal will bring together the management capacity of Ambev with the operational excellence and well established presence in the region of the CND.”
As a result of the partnership, the companies plan to expand ELJ’s ‘Presidente’ beer brand overseas and introduce international drink brands to the Caribbean region. Franklin León, president of CND, emphasized: “Since its launch in 1935, the Presidente brand has become part of Dominican life, culture and tradition.”
“This strategic alliance will elevate our business to another level, providing our team with new career and development opportunities, [and] taking Presidente, and all that it represents, further out into the world. At the same time we will maintain our historical and cultural ties with the Dominican Republic and its community,” he said.
Ambev praised their Caribbean partners, saying they had “great respect” for the León family who run the company, and were impressed by their team, the business and CND’s brand strength.
Medici, director of Ambev for Hispanic Latin America (HILA-Ex), said: “This strategic alliance with ELJ is an important step in our dream of becoming the leading company in the Caribbean and Central America.”
The deal is expected to be closed in the second quarter of 2012. When this happens, Ambev Brazil – a privately held subsidiary of Ambev – and ELJ will become shareholders in Tenedora CND SA, a holding company which will own 83.5 percent stake in the CND and hundred percent of shares in Ambev Dominicana SA.
The terms mean that Ambev Brazil will initially hold an indirect interest of 41.76 percent in CND, which will be acquired for a cash payment of approximately US$1 billion.
In 2011, the combined net revenue of the two entities was approximately US$570 million. The companies hope that the operation will contribute to the expansion of the EPS (earnings per share) in its first year.
Ambev Brazil also announced that it will acquire an additional stake of 9.3 percent in CND, which currently belongs to Heineken NV, for US$237 million on the closing date, when Ambev will hold a total indirect stake in CND of approximately 51 percent.