Russia & UK: BBH merger to lower Scottish & Newcastle expenditures by US$60-US$80 million

The merger of the Russian assets of Baltic Beverages Holding (BBH) on the core of Baltika Breweries will enable the company to lower expenditures by some $60 million-$80 million, Scottish & Newcastle, which owns BBH on a parity basis with Carlsberg, said in a release, Interfax News Agency Via Thomson Dialog NewsEdge announced August 09.

The integration of the company's Russian assets is proceeding at full speed and the sales and distribution systems of the Baltika, Vena, Yarpivo and Pikra breweries are being merged to provide a new national platform for the company's brands, the release says. Scottish & Newcastle believes the merger could reduce expenditures by US$60 million - US$80 million despite the fact that such a large-scale reorganization could lead to some problems, the release says.

The merger is to be completed by the end of the year. As part of the consolidation of the company's Russian assets, shareholders in Vena, Pikra and Yarpivo swapped their shares for an additional issue by Baltika Breweries. As a result, the share of Yarpivo common shares belonging to Baltika increased to 91.4% as of August 1, Pikra - 92% and Vena - 97.5%.

BBH increased beer sales in Russia 4.2% year-on-year in the first half of 2006 amid market growth of 6.1%. The company increased its share in the premium and licensed segments of the market, while reducing its share in the economy and mid-price range segments.

Scottish & Newcastle had revenue of 1.994 billion pounds sterling in the first half of 2006, up 6% year-on-year. Operating profit increased 7.6% to 227 million pounds sterling in the half.