Heineken Takes Pit
Dutch brewing corporation Heineken reached an agreement for the acquisition of Ivan Taranov Breweries (PIT) group. Representatives of the company are expected to sign the main package of documents for the deal worth $560 million. With this large acquisition of Russian brewing assets, Heineken believes it has completed its regional expansion. As a result, the struggle for second place in the Russian beer market between Heineken and Sun Interbrew is expected to intensify, as Heineken lags behind its Belgian rival by only 1% of the market.
PIT was established in 1998 and is controlled by Detroit Brewing. PIT includes three breweries in Kaliningrad, Khabarovsk and Orenburg. The Russian market share of the group in value terms amounts to 4%. In 2004, the company turnover exceeded $200 million. In Russia, Heineken has six breweries: two in St. Petersburg, one in Nizhny Novgorod, one in Sterlitamak, one in Novosibirsk and one in Yekaterinburg. The company controls 11% of the market in value terms. Turnover of the company in Russia exceeds $550 million.
In the last two months, representatives of Heineken were conducting active negotiations with all independent Russian brewers, including PIT, Moscow-based Ochakovo and Kazan-based Krasny Vostok. According to a source in Heineken, PIT was finally chosen because owners of other companies "asked too much." The source explained, "Management of Ochakovo estimated its assets almost at $800 million, and owners of Krasny Vostok named a sum close to $1 billion. Owners of PIT were more modest and estimated their business at $560 million."
Analysts estimate assets of PIT at $400 million to $440 million proceeding from the company's performance in 2004. At any rate, according to the source in Heineken, not only the price but also location of the breweries of PIT was important. After acquisition of this group, Heineken will receive production assets in the regions where it has been difficult for it to compete.
Source: Russian Business Monitor