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CASTLE MALTING NEWS in partnership with www.e-malt.com Chinese
05 August, 2005



Brewing news Russia: S&N, Carlsberg reject claims over Baltika consolidation row

Scottish & Newcastle PLC and Carlsberg A/S announced on August 3 they deny they had acted "unethically" and adopted "questionable legal practices" over their plan to consolidate the majority stakes in five Russian breweries held by its Baltic Beverages Holdings joint venture (BBH), AFX News communicated on August 3.

The two brewers are facing a court case -- on Aug 18 -- at which dissatisfied minority shareholders in the breweries will try and prevent the deal, which will see the largest brewery Baltika buying out the other four, from going ahead. They argue the deal will cost Baltika over 500 mln dkr and will leave the brewer with increased debt. They have accused S&N and Carlsberg of "highly questionable and unethical, if not unlawful, tactics," according to lawyers acting for the shareholders.

However, Christian Ramm-Schmidt, managing director of BBH -- the 50-50 joint venture between S&N and Carlsberg, which in turn has a 74.5 pct stake in Baltika -- told reporters that the plan was to create "value for all shareholders". He admitted, however, that the group should have spent more time explaining the proposals to its minority shareholders. "The consolidation of the four holdings into one will generate long-term benefits," he said.

He denied that S&N or Carlsberg had acted improperly over the proposed transaction and said the group's legal position under Russian law was sound. "We've taken legal advice and we have done nothing wrong. We reject the accusations that we acted 'unethically' or used 'questionable legal practices'," Ramm-Schmidt added.

The court case is understood to be led by a financial group called Electro Lir which bought just 50 shares in Baltika -- worth about 1,000 usd. "We have no idea who they are and what the reason is behind it. But under Russian law every minority holder has a right to claim," Ramm-Schmidt continued. He was speaking after BBH posted an 18.6 pct increase in first-half net sales to 816 mln eur and a 32.6 pct rise in earnings -- on an EBIT basis -- to 152 mln eur.

BBH, which operates 18 breweries in six countries in Eastern Europe, said its market share in Russia rose to 36.3 pct fuelled by a 17 pct rise in first-half beer volumes. It said it expected a continuation of the strong trend with mid-double digit volume growth for the remainder of 2005.





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