Baltika Breweries announces proposed merger with Pikra, Vena and Yarpivo

19/01/06 Baltika Breweries, the number one brewer in Russia and Eastern Europe, announces details of the Proposed Merger with brewers Pikra, Vena and Yarpivo. If approved, the merger will add major beer brands like Nevskoye, Yarpivo and Tuborg to existing top brands, including Baltika and Arsenalnoye.

"The combination of these four companies will strengthen Baltika as the leading brewer and the largest fast moving consumer goods company in Russia, as well as a proud symbol of Russian business success across the globe," said Anton Artemiev, Baltika Breweries President.  "With the merger, Baltika will become even stronger in the face of international competition in an increasingly consolidating market, and will realise efficiencies across the four companies, while expanding its geographic reach," Artemiev added.

The Proposed Merger should complete by late 2006.  In the first stage, subject to Baltika shareholder approval, shareholders in Pikra, Vena and Yarpivo will have the option to either exchange their shares into Baltika ordinary shares or sell them for cash at an equivalent value to Baltika.  In parallel, Baltika shareholders will have the option of either realising their investment or retaining their shares.

In the second stage, Pikra, Vena and Yarpivo will be merged into Baltika.  This stage will be conditional upon Pikra, Vena and Yarpivo shareholder approvals and regulatory consents.

Baltic Beverages Holding ("BBH"), majority owner of Baltika, Pikra, Vena and Yarpivo, has confirmed its commitment to the Russian beer market by reiterating that it will take shares in the enlarged Baltika in exchange for its shares in each of Pikra, Vena and Yarpivo rather than cash.

ZAO Deloitte & Touche CIS ("Deloitte"), a licensed appraiser under Russian law, was appointed to prepare an independent valuation of each of Baltika, Pikra, Vena and Yarpivo and determine the fair market value of all four companies.

In determining the share exchange ratios, cash offer prices and redemption prices for stage one the Baltika Board has considered, among other factors, the independent valuations prepared by Deloitte.  The Board of Directors of each of Pikra, Vena and Yarpivo have endorsed the independent valuations and the Proposed Merger.

Citigroup Global Markets Limited ("Citigroup") provided an opinion to the Board of Directors of Baltika as to the fairness to Baltika, from a financial point of view, of the share exchange ratios and cash offers.

Accordingly, the Baltika Board unanimously recommends that shareholders of Baltika actively vote in favour of the Proposed Merger.

The Baltika Board of Directors has adopted a resolution calling for an Extraordinary General Shareholder Meeting ("EGSM") of Baltika to consider and vote on the Proposed Merger and other related matters.  The EGSM will be held by postal ballot; the completed and signed voting ballots must be received by Baltika before 7 March 2006.

Baltika is the largest beer producer in Russia and Eastern Europe.  The company was established in St. Petersburg in 1990 and since 1996 has been the undisputed leader of the Russian brewing market.  Baltika operates five breweries located in St. Petersburg, Rostov-on-Don, Tula, Samara and Khabarovsk, with an aggregate production capacity of 24.0 million hectolitres per annum.  In 2004, Baltika produced 19.9 million hectolitres of beer.  Key Baltika brands, including Baltika, Arsenalnoye and Medovoye, licensed Foster.s and Carlsberg and a number of regional brands such as DV, Samara and Don, are sold across Russia and 38 other countries around the world.  The company employs around 7,500 people.

Pikra is the largest beer producer in Eastern Siberia.  The company was founded in 1991 on the basis of the Krasnoyarsk Brewery which dates back to 1875.  Pikra operates one brewery in Krasnoyarsk with production capacity of 1.5 million hectolitres per annum.  In 2004, the company produced 1.1 million hectolitres of beer.  Key brands include Kupecheskoye and Legenda, which are sold primarily in its home market of Siberia, however Pikra also has a notable presence in the Far Eastern region of Russia.  The company employs around 600 people.

Vena is one of the leading breweries in the North-West and Urals regions.  The original brewery was founded in 1872.  Vena operates two breweries, one in St. Petersburg and the other in Chelyabinsk, with an aggregate production capacity of 5.5 million hectolitres per annum.  In 2004, Vena produced 3.1 million hectolitres of beer.  Key brands include Nevskoye, Uralsky Master and licensed Tuborg.  Vena employs around 1,500 people.

Yarpivo is the fifth largest beer producer in Russia.  The original brewery was founded in 1974. Yarpivo operates two breweries, one in Yaroslavl and the other in Voronezh, with an aggregate capacity of 6.0 million hectolitres per annum.  In 2004, Yarpivo produced 5.3 million hectolitres of beer.  Key brands include Yarpivo, Volga, Slavnoye, Voronezhskoye and Irish Red beer.  Yarpivo employs around 1,700 people.

http://eng.baltika.ru/news