Nicholas Watson in Prague -
Stock Spirits Group is set to announce on Thursday, September 26 plans for an IPO on the London Stock Exchange, which it hopes will raise about Â£52m to help finance its goal of becoming Central and Eastern Europe's leading spirits producer.
The London-headquartered company - which was created in 2007 with the backing by Oaktree Capital Management in order to consolidate some of Emerging Europe's leading national producers of spirits and liqueurs - plans to sell new and existing shares to give a free float of 25%, valuing the company at €750m-850m.
Stock Spirits has operations in Italy, Poland, the Czech Republic, Slovakia, Slovenia, Croatia and Bosnia-Herzegovina, and its 25 brands include such household names as Stock 84 brandy, Fernet Stock bitter, as well as five "millionaire" brands (ie. those selling more than a million 9-litre cases a year) of vodkas Czysta de Luxe, Lubelska, Zoladkowa Gorzka and 1906, and Bozkov rum.
The IPO, which has JP Morgan Cazenove and Nomura as the joint global coordinators, is due to be completed by the end of October and the money raised will be used to fund a growth strategy that includes consolidating the fragmented industry in the region. The company points out that the CEE countries in which it is not present sold 107m 9-litre cases in 2012, which is equivalent to 38bn shots. Annual sales volume in 2012 was around 140m litres - more than 5bn shots.
"It's a huge region of consumers who have a long history of drinking spirits," says Chris Heath, CEO of Stock Spirits. "Historically, the GDP per head has been lower than in the West so consumers there, while they may aspire to buy the international brands, have instead bought domestic products and that's the main opportunity: to come into the region and create the leading drinks business."
As such, Stock Spirits' model has been to acquire the best loved and recognized brands in each market and improve the quality of the existing product, before then stretching the product into new areas like different flavours, ages or categories. "We're very much about portfolio expansion using existing brands," says Heath.
Figures released alongside the IPO announcement show that Stock Spirits' sales during the first half of 2013 increased 13.9% to €153.1m from the year-earlier period and ebitda rose 20.4% to €34.3m.
In 2012, Stock Spirits said ebitda grew 6.8% to €68.8m, continuing an unbroken record of profit growth each year since the formation of the group five years ago, on sales of €292m. The company pointed out this growth was achieved despite the methanol poisonings that occurred in September from the Czech illegal alcohol trade, which killed 38 people in the Czech Republic and four in Poland, and led to a temporary ban on the sale and export of all beverages with an alcohol content above 20% volume.
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