Canada: Sleeman looking at prospective buyers
The board of Sleeman Breweries Ltd. will begin considering proposals to purchase Canada's third-largest beer maker within 90 days, company chairman and chief executive officer John Sleeman said May 30, The Globe and Mail posted May 31.
The brewer's investment bankers have received "several" proposals from both international and domestic beer makers, he said.
"We have interest from brewers both inside of Canada and outside of Canada," Mr. Sleeman said, following what could be the company's final annual meeting.
He characterized all the inquiries as serious. "They're not just kicking the tires," he said
Industry analysts point to Molson Coors Brewing Co., which has a leading Canadian market share, as a possible suitor. Britain's SABMiller PLC is also thought to be interested in buying Sleeman's brands and operations to enter the Canadian market.
Earlier this month, Sleeman disclosed it had asked BMO Nesbitt Burns Inc. to review its strategic options, including a possible sale of the company.
The Guelph, Ont., brewer was forced to reveal the process after Carlos Brito, the CEO of the world's largest beer maker InBev SA, told analysts on a conference call that Sleeman was "putting the company up for sale."
InBev, whose subsidiary Labatt Brewing Co. Ltd., is the No. 2 beer maker in Canada, is thought to have considered purchasing Sleeman. But Mr. Sleeman said May 30 neither he nor his company's bankers had spoken to Mr. Brito or InBev representatives since the conference call.
Mr. Sleeman also said an outright purchase of his company is not the only option on the table. He indicated there have been talks to merge or combine Sleeman with another brewer.
"We're seeing some very interesting proposals," he said.
Several shareholders feted Mr. Sleeman at the meeting, thanking him and the company at what they said could be its last public gathering. In turn, Mr. Sleeman publicly lauded company employees, customers and shareholders.
"It will be disappointing not to have it happen again," he said.
In its thirst for growth, Sleeman, launched in 1988 as a premium craft brewer, has been saddled with too many brands from acquisitions and several inefficient breweries.
At the meeting, several shareholders raised questions about why the company has so many brands and why its costs to produce beer are higher than many of its rivals.
Sleeman's financial performance has been squeezed from all sides of the Canadian beer industry.
Discount brands from rivals Lakeport Brewing Co. and Brick Brewing Co. Ltd. cut into sales, forcing Sleeman to put more marketing dollars toward its own value portfolio. Sleeman discount label volumes, including Pabst and Old Milwaukee, were up 30 per cent in the first quarter, but the cheaper beer means lower margins and profit for the company.
In some markets, such as Quebec, Labatt has cut the price of its Belgian import Stella Artois, and Molson has done the same for Netherlands import Heineken and Mexico's Corona. To remain competitive Sleeman has put its premium brands on sale.
Sleeman lost $CA813,000 in the first quarter, compared with a $CA1.6 million profit the year before.
Last year, Sleeman's profit fell 44 per cent from 2004 to just over $CA8-million. Annual sales declined 2.3 per cent to $CA206-million.
Its shares had languished between $CA10.51 and about 13.50 for much of the year, but the stock has traded as high as $CA17.44 in the weeks since it announced the strategic review. On the Toronto Stock Exchange on May 30, Sleeman shares rose 41 cents or 2.6 per cent to close at $CA16.15.
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