Canada: Sleeman Breweries Ltd. shows optimism for its premium beer brands after a planned acquisition by Sapporo Breweries Ltd.

Sleeman Breweries Ltd. sees new potential for its premium beer labels after a planned $400-million acquisition by Japan's Sapporo Breweries Ltd. John Sleeman, chairperson and chief executive of the Guelph-based brewery, said August 14. Sapporo sees Canada as a growth market for premium beer and is "very interested in expanding it," The London Free Press commented August 15.

"One of their (Sapporo's) long-term goals is to help Sleeman reinvest . . . on producing and selling premium beer," he told analysts in a conference call, while reassuring them the company isn't "any less interested" in its value brands.

On the international market, he said Sapporo is also looking to Sleeman's brands for expansion outside Canada. Sleeman's earnings have been hurt by stiff competition in Canada by makers of non-premium "buck-a-beer" brands.

"It's pretty premature at this point to discuss what different countries in the world that our brands would be available, but they're interested in growing their business both inside and outside Japan," Sleeman said. "We've had fairly extensive conversations about the value of the U.S. market."

He said Sapporo is exploring ways to sell more Sleeman and Unibroue in the United States.

The quick shift in prospects for the major Canadian brewer comes after Sleeman said August 11 it would sell itself to Japan's Sapporo in a deal worth about $400 million, including debt (figures in CA$ unless stated).

That news sent the brewer's stock to an all-time high August 14, the first trading since the announcement.

The sale was announced a day after Sleeman reported a sharp rise in its second-quarter profits, a sharp turnaround from the $2 million restructuring charge the company faced in the first quarter from cutting 80 jobs in August.

Sleeman, which put itself on the auction block earlier this year, cut an additional 40 jobs last week. Analysts asked the chairman if any more job cuts or facilities closings are in sight now that Sapporo is involved. Sleeman said there are no such plans. But he added: "I don't think it's fair to paint Sapporo into a corner and say that everyone is going to keep their job."

Investors sent shares of Sleeman Breweries Ltd. soaring to a record high yesterday as the chief executive of the Guelph-based beer maker said its takeover by a Japanese brewing company will provide new opportunities for growth.

Sleeman shares rose 17 per cent to close at $17.37 on the Toronto Stock Exchange august 14. The shares reached a high of $17.55 during trading earlier in the day.

"It really would mean investors would perceive the bid would go through," consumer products analyst Ron Ho of Raymond James in Vancouver said, referring to the stock's rise.

Observers said it seems increasingly unlikely that other rivals, such as Molson Coors Brewing Ltd. or Labatt Brewing, which is owned by InBev SA of Belgium, would offer competing bids.

"There's always a possibility but when you look at the price they would have to pay, I think it's less of a possibility," Ho said.

Sleeman and Sapporo already have a business connection, with Sleeman brewing Sapporo beer in Canada under a licensing agreement.

Sleeman said that he will tender his shares to the bid and that the company's board has urged shareholders to accept the offer. He also said that he expects to be on the board for the foreseeable future, though contracts have yet to be signed.

The offer is conditional on the acceptance by at least two-thirds of Sleeman shareholders, along with approval under the Investment Canada Act. It is expected to close by mid-October.

The agreement gives Sapporo the right to match any competing offers. There is also a non-completion fee of $8.5 million, which would only be paid under certain circumstances.

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