Oligarch Swoops For Vodka Giant

A Russian billionaire-backed fund is in exclusive talks to buy Poland's top spirits firm for nearly £600m, Sky News understands.

Source: SKY News

By Mark Kleinman, City Editor

21 January 2013

A fund backed by one of the Russian businessmen who netted billions of dollars from the sale of a joint venture with BP is in talks to buy the biggest spirits producer in Central and Eastern Europe.

I have learnt that Pamplona Capital Management is close to a 700m euro (£587m) takeover of Stock Spirits Group, which owns some of the most popular vodka and other spirits brands in the world.

Pamplona is backed by Alfa Group, a company headed by Mikhail Fridman and one of the members of the AAR alliance which last year agreed to end its conflict-plagued joint venture with BP in Russia by selling out to Rosneft, the Kremlin-controlled energy giant. The deal netted Mr Fridman and his partners at least $7bn each, cementing their status among the world's wealthiest individuals.

People close to the talks said Pamplona had secured a period of exclusivity to finalise a deal with Oaktree, and that an agreement could be reached within weeks.

Goldman Sachs, the Wall Street bank, is among the lenders understood to be financing the deal for Pamplona, with a number of other banks lining up for a role.

Stock, which is based in Britain, has been owned by Oaktree Capital Management, another investment firm, since 2007.

The company traces its roots back to the Austro-Hungarian empire of the late nineteenth century, and now claims to be the biggest spirits producer by volume in the Czech Republic and Poland. It is also a major player in markets such as Croatia, Italy, Slovakia and Slovenia.

Among its major brands are Stock 84 brandy, Fernet Stock bitter as well as vodkas such as Wodka Zoladkowa and Orzel. Some of the products are distributed in the UK through big supermarkets although Britain accounts for a tiny proportion of the company's sales.

Stock is chaired by Jack Keenan, a former executive at Diageo, and run by Chris Heath, the former chief financial officer of Gondola Holdings, the parent company of restaurant chains including Pizza Express, ASK and Zizzi.

People close to the situation said it was likely that Stock's management team would continue to run the business under Pamplona's ownership if the takeover is completed.

The talks with Pamplona represent at least the second attempt by Oaktree to sell Stock. In 2011, it examined a stock market listing of the company, following which Diageo expressed an interest in buying it.

Those talks came to nothing, although it is conceivable that Diageo or another of the major spirits producers will return in future with an offer to buy Stock as they attempt to broaden their exposure to major spirits markets in the region.

Pamplona invests funds across Europe and has tried to buy a string of assets in the UK, including an aborted attempt to acquire the snacks arm of United Biscuits late last year.

It owns Oakwood Global Finance, which comprises two portfolios of residential mortgages, and KCA Deutag, a provider of drilling and engineering services to the oil and gas industry.

Oaktree and Pamplona both declined to comment on Monday.