SAB beats off rivals to snatch Czech brewers in $629m deal

SOUTH AFRICAN Breweries yesterday beat off competition from rivals, including Bass and Heineken, to buy a majority stake in the two leading Czech brewers, giving it a 44 per cent market share.

SOUTH AFRICAN Breweries yesterday beat off competition from rivals, including Bass and Heineken, to buy a majority stake in the two leading Czech brewers, giving it a 44 per cent market share.

SAB has agreed to pay $321m (£195m) for an initial 51 per cent interest in a joint venture controlling Plzensky Prazdroj - maker of Pilsner Urquell - and Pivovar Radegast. Nomura will keep 49 per cent of the business, but put and call options will allow SAB to reach 100 per cent ownership by June 2001 for a further $308m.

Yesterday's announcement surprised the City, as Nomura had said it would put the breweries out to tender this week, having signed confidentiality agreements with 10 interested bidders, understood to include the Bass, Heineken, Anheuser-Busch and BBAG of Austria.

Dr Randall Dillard, managing director of Nomura International, said: "SAB came to us late in the day with a proposal that offered Nomura a partnership in the future business."

SAB has pledged to make Pilsner Urquell its flagship brand and accelerate the development of the business globally, while keeping the Czech Republic as its major location for brewing in Europe.

A spokesman for Bass, which agreed to sell its minority stake in Radegast to Nomura in September and which owns the third-ranked Czech brewer, Prazske Pivovary, said: "It's business as usual for us. We are still very interested in the Czech Republic."

Bass lost a battle for Radegast to Nomura in 1997. Earlier this year Nomura was allowed to merge its Czech brewing interests, despite objections from Bass. Bass is understood to have asked Nomura for a lockout agreement prior to the Prazdroj and Radegast assets being put on sale.

Graham Mackay, SAB's chief executive, said Pilsner Urquell would be promoted as the oldest and best pils lager.

The deal will make SAB central Europe's leading brewer and double its annual production to 17 million hectolitres.

On completion, SAB will pay Nomura $100m cash; the balance of $221m will be settled before 30 June 2000. The deal is subject to Czech regulatory approval. SAB shares yesterday closed up 5.5p at 552.5p.