M&A

Beer Pong Battle Breaks Out

The co-owners of a Russian brewery lock up in a takeover slugfest.
Stephen TaubJanuary 8, 2008

A good ol’ fashioned barroom brawl has broken out in Europe between partners in a joint venture that owns a brewery with operations in Russia and other countries formerly part of the Soviet Union.

London-based Scottish & Newcastle PLC submitted a claim to the Arbitral Tribunal in Stockholm in a bid to control the business, called Baltic Beverage Holdings, whose other co-owner is Denmark-based Carlsberg. A decision is due by July 3.

S&N’s move is partly a retaliatory one against Carlsberg, which has teamed up with Heineken NV in a bid to take over S&N. One key issue is that Carlsberg allegedly violated the “shotgun” clause of Baltic’s shareholders agreement, which provides that if one partner makes an offer for the other’s stake, it should also be prepared to sell its stake at the same price, Thomson reported.

“Carlsberg has misused confidential information, has breached its duty of loyalty and other express provisions in the Agreement, has circumvented the ‘shotgun’ and its actions will damage the joint venture,” S&N asserted in a press release and filing.

Baltic Beverage has offices in Kista, Sweden, and St. Petersburg, Russia. It operates 19 breweries and holds the top positions in Russian, Baltic, and Kazakh beer markets, and ranks third in Ukraine. Its brands include Baltika, Arsenalnoe, Slavutich, and Alma-Ata.

S&N is a major international brewer that claims to have market-leading positions in 15 countries across Europe and Asia. In Europe, its main market, it is the number-four brewer in volume and number two in profit. Its brands include Foster’s and Kronenbourg 1664.

The company says it would enjoy major synergies from controlling BBH. “With increased exposure to growth markets S&N would become a business with one of the most attractive sales, earnings and margin profiles in global beverages,” it said in its press release.

If the group bidding for S&N prevails, Carlsberg would wind up with sole ownership of Baltic Beverages and S&N’s French, Greek, and Chinese operations, while Heineken would take control of its British, American, Indian, and other markets, the Associated Press reported.

S&N already has rejected two offers from Carlsberg and Heineken, according to the AP. The suitors have until Jan. 21 to make a final offer.

“While the consortium continues to seek to acquire S&N’s unique portfolio of assets on the cheap, we are continuing to explore fully every option to deliver shareholder value,” said S&N chief executive John Dunsmore. “Carlsberg’s desire to terminate the BBH joint venture by circumventing the BBH shareholders’ agreement provides a huge opportunity for us to take control of BBH through a successful arbitration process.”

Carlsberg responded in a statement: “Carlsberg continues to be fully committed to the future of BBH and would suggest that S&N exercise the same high level of commitment pending the outcome of the arbitration proceedings.