Warsaw-based Central European Distribution Corporation (CEDC), the world’s largest vodka producer with annual sales exceeding 270m litres, has decided not to pursue an acquisition of Nemiroff, the Ukrainian vodka producer.
Nemiroff is the world’s third biggest vodka company in terms of sales, and is estimated to be worth more than $300m. In addition to CEDC, other parties reported to be interested in Nemiroff include Russian Alcohol Group, Brown-Forman, Pernod Ricard and Stock Spirits of Poland. Founded in 1992, Nemiroff saw its net sales fall 14% in 2009 to $217.6m and net profit by 50% to $38.3m with debt standing at $10.5m.
CEDC enjoys leading positions in its key markets of Poland, Russia and Hungary and is also a major importer and distributor of alcoholic beverages. The group’s brand portfolio includes BOLS, Zubrowka, Absolwent and Soplica in Poland; Green Mark and Parliament in Russia; and Royal Vodka in Hungary. CEDC is also major exporter, selling its brands, in particular Zubrowka, Green Mark and Parliament. Zubrowka is exported to over 40 countries around the world, including the US, the UK, France and Japan.
“We have decided to withdraw from the sale process of Nemiroff. We have full respect for the management of the Nemiroff Group, who have been able to build a successful brand over the last ten years, but after thorough analysis we have determined that it is not in the company’s interests to continue to pursue this transaction at this time,” comments William Carey, president and chief executive of CEDC.
He adds: “We have invested over $1.5 billion over the last three years in Russia and will look to maximize the return on this deployed capital. We believe we have a solid leading market position to capture further growth in the region in the next three to five years and management will continue to focus on maximizing this opportunity.”
CEDC was going to use the net proceeds from the expected sale of its Polish distribution business, as partial consideration for the acquisition of Nemiroff. CEDC is still on track to close the sale of its Polish distribution business to Eurocash at the beginning of August 2010, and will then determine the use of the proceeds. The distribution business being sold has an estimated operating profit of $17-21m on projected net sales revenue of approximately $675m for 2010.