South Korea: Carlsberg sells stake in Hite Brewery in order to reduce debt
Carlsberg announced on November 2 that it reduces its holding of Hite Brewery Co. Ltd. ("Hite") and receives net proceeds of approximately DKK 1.9bn that will be used to reduce Group debt.
The sale will result in a profit of approximately DKK 1.2bn that will be offset by impairment of goodwill and other non-cash items.
Carlsberg announces the placement in the market of a 11.9% stake in Hite Brewery Ltd. Co. South Korea. Carlsberg has effectively sold 2,276,052 shares for a net cash consideration of approximately DKK 1.9bn.
Carlsberg initially invested in Hite in 1999 and prior to the above mentioned transaction held a stake of approximately 25%. The investment was accounted for as an associate and as such its results were included in consolidated EBIT. In 2004 Hite contributed DKK 135m after tax to Carlsbergs EBIT.
Following completion of this sale, the remaining 13.1% of Hite owned by Carlsberg will be accounted for as a financial investment which, based upon the price achieved in the placement, has a market value of approximately DKK 2.2bn.
Since Carlsberg's initial investment in 1999, Hite has performed very strongly from both an operational and financial perspective. Consequently, the value of the capital invested by Carlsberg has increased substantially and has become increasingly material for Carlsberg. This transaction releases a substantial level of capital to the Group, whilst retaining a highly valuable stake as the second largest investor in Hite.
This divesture is consistent with Carlsberg's commitment to free-up invested capital from minority positions where there is no clear path to control, thus reallocating resources to core businesses as well as strengthening the financial position of the Group.
The sale will result in a capital gain of approximately DKK 1.2bn, which will be booked as a special item in the 2005 accounts for the Group. This is expected to be offset by impairment of goodwill and other non-cash items, thus resulting in no changes in expected operating profit and net profit for 2005.
The full accounting impact of the above will be announced in connection with the release of preliminary Profit Statement for 2005 at 22 February 2006.
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