India-born beer baron Karan Billimoria may now look to exit Cobra Beer earlier than expected as talks with world's largest spirits maker Diageo seem to have failed. Diageo called off the talks citing profitability concerns, reports Economic Times. This has opened the way for global spirits giants like InBev, SABMiller, UB and also buyout private groups.
Last month it was reported that Diageo was holding due diligence to pick up around 30% stake for $80-100 million. Cobra is also now raising a debt of $50-70 million, on top of the existing debt of around $90 million, to meet the operation costs.
Earlier this year it was reported that promoters of Cobra could look at exiting the company over a 3-5 year time-frame. US hedge fund Och-Ziff Capital Management has invested $55 million in Cobra, and maybe looking to exit. Cobra Beer is seeking a valuation of about $400 million, including the debt, and has appointed NM Rothschild as an advisor for its fund-raising plans. Cobra recently acquired 76 per cent stake in Iceberg brewery in Bihar and has bottling arrangements with eight breweries across the country. The brands operated by Cobra beer are King Cobra, Cobra Beer and the recently acquired strong beer, Iceberg.
Cobra sold 4.1 million cases of beer worldwide last year, with 23 per cent of its sales in India. The Indian beer market is duopoly at this stage, with Mallya's UB and SAB Miller controlling more than 80% of the market. The acquisition of Cobra by either one of them would give it the edge in the market.
If InBev - who has just acquired US-based Anheuser-Busch in a $52 billion deal - acquires Cobra, it would mark the entry of strong third player in the Indian beer market. Through its acquisition of Anheuser-Busch, InBev has also got control of Crown Beers India, who has a 500,000-hectolitre brewery located in Hyderabad.