India & Nepal: Carlsberg's India and Nepal JV partner to sell its entire 33.3% stake for $744 million

Danish brewer Carlsberg has said the Khetan Group � which owns 33 per cent shares in the holding company which manages businesses in India and Nepal � has put a formal notice to sell its entire stake to the brewer for $744 million (₹6,155 crore), The Hindu Business Line reported on February 7.

Carlsberg is the third largest brewer globally and Carlsberg South Asia Pte Ltd (CSAPL) is the holding company for India businesses (100 per cent) and Nepal (90 per cent).

In a note to its financial statement, the Danish brewer � best known for beer brands like Tuborg, Carlsberg, Brooklyn and Blanc � said �for some time�, the group has had serious disagreements with its partner CSAPL Holdings Pte Ltd (CSAPLH) in relation to CSAPL.

The disagreements concern numerous allegations of breaches by Carlsberg against its JV partner. Allegations pertained to breach of shareholders� agreement and governance matters. Carlsberg owns two thirds the stake and CSAPLH, the remaining.

�The put option valuation was released by the valuers on February 6, stating a value for CSAPLH�s shares in CSAPL at $744 million,� the Carlsberg Group explained in its financial statement. It added that CSAPLH (the partner) issued �a formal put notice� on February 6 to sell its 33 per cent shareholding at the put option valuation amount.

In finance parlance, a put option is a contract giving the option buyer the right to sell a specified amount of an underlying security at a pre-determined price and within a specified time frame.

Carlsberg Group said the transaction (buyout of India partner) could potentially be completed in 2023 and subject to the clarification of any disputes raised by the shareholders and timelines for any regulatory approvals.

The Group said CSAPLH had previously asked for an amount that it �considered to be unreasonably high and not reflecting the fair value of the shareholding�.

�From the put option valuation received, it is the group�s assessment that key assumptions, which the group considers to be unreasonable, may have been applied in the valuation performed by CSAPLH�s appointed valuer,� it said, while adding that the put option valuation can be disputed by shareholders.

�The group will work with its external advisors to evaluate its position and assess whether CSAPLH has committed additional breaches of the shareholders� agreement, which would justify further legal steps against CSAPLH,� it said.

Incidentally, the beermaker, at the request of its partner, had referred the disagreements �to arbitration in Singapore� in May last year. The tribunal found CSAPLH to be in �incurable material breach of the shareholders� agreement and awarded Carlsberg the right to call CSAPLH�s shares in CSAPL�, it said, adding that the group immediately invoked the right to begin the call option valuation process.

Meanwhile, Carlsberg�s India business delivered more than 30 per cent volume growth in 2022. Revenue was up by a mid-single-digit percentage, benefiting from strong growth of the premium Carlsberg. Tuborg also grew strongly, it said in an investor presentation.

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