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Turkish Brewery Gets Red East Cheap
Efes buys the company with at 50 percent off

The Turkish Efes holding announced the purchase of the second-to-the-last independent presence on the Russian beer market yesterday. It paid brothers Airat and Ilshat Khairullin $390 million for the Krasny Vostok (Red East) brewery.

The price for the brewery came as a surprise, since the brothers had been asking $1 billion for the brewery, and its market price had been estimated at $700 million. Efes acquired 92.34 percent of the stock in the brewery and the deal is now awaiting approval from regulators. State Duma member Airat Khairullin and his brother Ilshat, a member of the Red East board of directors, will retain the remaining 7 percent of the stock.

For it money, Efes is getting two plants, in Kazan and Novosibirsk, and three malt houses. The acquisition will bring the Turkish holding’s beer production in Russia up to 180 million dal. per year, almost 10 percent of the market, and its malt production will rise from 46,000 metric tons to 139 tons per year. The Turkish parent company control 79 percent of the Turkish beer market with annual production of 90 million dal. It also produces beer in Kazakhstan, Serbia and Montenegro, Romania and Moldova.

Its main brands in Russia are Efes, Warsteiner, Stary Melnik and Sokol. A bank, insurance company and chain of retail stores were taken off the breweries book before its sale. That fact was used by a company spokesman in Kazan to explain the surprising low price for the enterprise. However, another company source speculated that the Khairullin brothers would receive unspecified compensation after the deal was completed. The brewery’s market share had fallen from a high of 7 percent several years ago to 2.6 percent at present.

Analysts are saying that the rush on independent players on the market is over. Last year, practically all the companies active on the Russian market were negotiating with Krasny Vostok and Ochakovo, the last independent brewers. But the owners of those companies were demanding too much money for them. Sun Interbrew, the second largest holding on the Russian beer market, quit negotiations for Krasny Vostok and announced plans to build a new plant in Irkutsk. At the same time, SABMiller broke off talks for Krasny Vostok. At Ochakovo, they say that the brewery is not for sale at any price.

Roman Ovchinnikov

Kommersant - 12 August 2006
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