Heineken

"Once again Rupert had acquired an interest in an enterprise with partners that were old, established firms. Again he had chosen his partners carefully, people who also had networks of influential friends and acquaintances. Heineken was an old Dutch brewery with a strong family tradition.10 Whitbread (London) had been launched in London by Samuel Whitbread I in 1742. Colonel Whitbread, who had close links with the royal family, was chairman of the British company in the 1960s and became vice-chairman of the South African company."

"The transaction with Heineken also included 49 per cent of the long drinks company, but we kept the remainder and managed the business. Heineken did not have much interest in that business so a year later I went to see Jean-François van Boxmeer, who was later to become Heineken’s chief executive, and offered to buy the Dutch brewer out of the venture. ‘Interesting,’ he said. ‘You actually want to buy the business from us?’ I replied: ‘Yes. I can pay cash for it now,’ and he laughed. ‘That’s great news,’ he said. ‘If you want to buy it, basically it means it’s worth a lot. If you want to buy it I don’t want to sell.’ He tapped his nose. ‘You have a nose for business,’ he said, ‘I want to sit next to you as a seller!’ We ended up selling the long drinks company to a listed Russian company and, yes, we both made money on the deal."

"We made Lowenbrau under licence from the German company. We were the first plant to get such a licence to produce foreign quality beer. The royalties we generated for Lowenbrau in Russia had a side effect in that Heineken also showed an interest and ended up buying Lowenbrau in Germany as well."

"I took the lead in the meeting and I guess I put on a good show, as we still did the deal, selling to Heineken for $400 million, including a $50 million earn-out if we met certain targets. The date was 20 February 2002. As part of the deal, Heineken asked me to stay on as chairman for two years. A lot of capacity came on stream in the Russian beer market in 2002 and we did not hit the target. I still made $100 million from the Heineken deal, more than I had ever made or had before."

"Another reason I didn’t walk away was that I knew I would be criticised for such an action in Iceland and did not want to deal with the consequences of that. I feared the criticism that would ensue and the rumours that would be spread which would hurt me, not only in Iceland but abroad. People would say that we didn’t really have the money, that the sale of Bravo to Heineken hadn’t been the great deal it truly was, and so on. But my father was confident that it would all end well. I said to him: ‘Why are you so confident? I have a very bad feeling about this.’ But he just replied, in the most typical Icelandic way: ‘*Thetta reddast*,’ meaning that it would all work out fine somehow in the end. It did not help that the media were concentrating on the personalities rather than the privatisation. The story became about my father redeeming himself by becoming Landsbanki chairman and a major shareholder. It was a great story about a once-famous Icelandic family making a grand return, but the attention that we received made me uneasy. On the day the deal was completed I was weary and apprehensive. ‘Be careful with all the publicity,’ I said to my father. ‘Good publicity is often followed by bad. Something could go spectacularly wrong and this is a small society. People patting you on the back now will be the same ones who spit at your back later.’"

"What was it like to add $2 billion to my personal wealth in the space of just two years? It certainly wasn’t ‘easy come, easy go’, although that is how it might look now, but it was definitely rapid. I made my first $100 million in 2002, from the Bravo brewery sale to Heineken. In those years Pharmaco, later Actavis, a generic pharmaceutical business where I was the largest shareholder, had become a public company with a stock market capitalisation of about $50 million – so small that London investment bankers would barely give me the time of day. But Actavis grew phenomenally both organically and through mergers and acquisitions, and by 2008 it was valued at €5.3 billion ($7.3 billion dollars at the exchange rate of the time) and was Iceland’s biggest industrial company, second in size only to the banks on the nation’s stock exchange. Actavis, in all its guises, was my biggest, most profitable and most complicated investment. It sums up the way I like to do business. In its early days, it involved putting together an equity consortium in a privatisation in eastern Europe. Then there was a reverse takeover of a listed company, the spin-off of its core business, a hostile cross-border takeover of another listed company, a public-to-private leveraged buy-out, financial restructuring and finally a sale to a listed company."

"We held a beauty contest with a few investment banks, hired Merrill Lynch and sent out a prospectus to interested buyers in autumn 2001. SAB, Interbrew and Heineken all submitted final bids, but all were lower than what I had been hoping for. I had set the bar high. I didn’t want to sell – but I was having mixed feelings. Heineken was the strongest contender, so we flew to London on 2 January 2002 to meet them and see if they wanted to do a deal. We were told that Freddy Heineken, the legendary former chairman and chief executive and owner of a controlling 50 per cent interest in the family beer company, was very much behind getting involved in Russia but had demanding criteria. We arrived in London and checked into a hotel. On our way to meet Heineken the following day, I spied a *Financial Times* front page reporting that Freddy had died the previous night. I took the lead in the meeting and I guess I put on a good show, as we still did the deal, selling to Heineken for $400 million, including a $50 million earn-out if we met certain targets. The date was 20 February 2002. As part of the deal, Heineken asked me to stay on as chairman for two years. A lot of capacity came on stream in the Russian beer market in 2002 and we did not hit the target. I still made $100 million from the Heineken deal, more than I had ever made or even had before. And Capital, which had been so close to backing out, tripled its investment."

"We made Lowenbrau under licence from the German company. We were the first plant to get such a licence to produce foreign quality beer. The royalties we generated for Lowenbrau in Russia had a side effect in that Heineken also showed an interest and ended up buying Lowenbrau in Germany as well."

"The transaction with Heineken also included 49 per cent of the long drinks company, but we kept the remainder and managed the business. Heineken did not have much interest in that business so a year later I went to see Jean-François van Boxmeer, who was later to become Heineken’s chief executive, and offered to buy the Dutch brewer out of the venture. ‘Interesting,’ he said. ‘You actually want to buy the business from us?’ I replied: ‘Yes. I can pay cash for it now,’ and he laughed. ‘That’s great news,’ he said. ‘If you want to buy it, basically it means it’s worth a lot. If you want to buy it, I don’t want to sell.’ He tapped his nose. ‘You have a nose for business,’ he said, ‘I want to sit next to you as a seller!’ We ended up selling the long drinks company to a listed Russian company and, yes, we both made money on the deal."