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Alphabet Soup: A-B Enters the Fray Between S&N and CG for BBH

This is a story that’s really been going on for some time now, at least a year, probably more. In a nutshell, the BBH (or Baltic Beverages Holding) was created in 1991 by a 50/50 joint venture between Oy Hartwall (a Finnish brewing group) and Procordia Beverages, best known for Pripps (then a Swedish company). The plan was to acquire breweries in the lucrative areas of Russia and the Baltic. And little by little, they did just that. But in 1995, another Swedish company, Orkla, bought Pripps an created a new company, Pripp-Ringnes, only to then merge with Carlsberg in 2000. As a result, the Carlsberg Group became a 50% owner of BBH. Two years later, Scottish & Newcastle bought Hartwell and that’s how we got to today, with BBH being a 50/50 joint venture between Carlsberg and S&N. In the meantime, BBH became the owner of 19 breweries in Russia, Kazakhstan, the Ukraine, Uzbekistan and the Baltics (Estonia, Latvia and Lithuania) which gives them a commanding share of the market, nearly 40% of the fifth largest — and possibly fastest growing — beer economy in the world. Not surprisingly, the predatory nature of corporations generally means that other companies have developed in interest in BBH.

Lately things have heated up with potential take-over bids. The main players have been primarily the Carlsberg Group and Heineken, both of whom have attempted hostile takeover bids to wrest control of BBH from S&N. The negotiations have been very public and quite contentious with accusations of bad faith and underhanded dealings flying around so fast and furious it’s like a blizzard. I’ve been following it somewhat casually but haven’t written about it before now. What’s changed? Today the London Telegraph is reporting that Anheuser-Busch is considering “a potential £4.6bn bid for full control of BBH.”

From the Telegraph article:

S&N already owns 50 per cent of BBH alongside Carlsberg. But the Edinburgh-based brewer is preparing a bid for full control of BBH as part of its defence against Carlsberg, which is plotting its own £10bn takeover bid for S&N as part of a consortium with Heineken.

S&N’s plan would be to finance a bid for BBH by offering a 25 per cent stake to a minority partner.

Anheuser-Busch has long coveted a place in the rapidly expanding Russian beer market and replacing Carlsberg in a new joint venture with S&N would offer it part ownership of the country’s leading brewer.

I was pretty sure A-B had a long-standing relationship with Carlsberg. They definitely used to distribute Carlsberg and their Elephant Malt here in the U.S. It’s interesting to see how quickly any loyalty they might otherwise have felt to Carlsberg over their years of business together goes out the window when the dollar signs twinkle in their eyes. This whole scenario reminds me of your average Godzilla movie where the giant lumbering monsters of business do battle with each other while at the same time stomping on and smashing to bits the very world in which they, too, live. Whatever happens to those flattened buildings (and people) destroyed in their wake are somebody else’s problem, they’re simply externalities. We’re merely the frightened tiny ants of people who can do nothing except watch as they destroy our city.

Rhetoric aside, it will certainly be interesting now to see how this plays out. I know Heineken desperately wants a bigger piece of the Russia beer pie. That’s specifically the reason they bought Krusovice from the Radeburger Group last year. As for A-B’s interest, with slowing sales of domestic beer, I can only imagine they’d love a quick fix like this.


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