Absolutely a fortune to be made

Pernod Ricard, Bacardi, Diageo and U.S. holding company Fortune Brands seem to be falling over themselves to buy Vin & Sprit, the maker of Absolut vodka, from the Swedish government. Private equity funds have also shown an interest.

Of the firms soon to be sold off in Sweden’s largest-ever privatisation push, 90-year-old Vin & Sprit has drawn the largest contingent of publicly declared suitors. V&S’ products include other brands, such as Cruzan rum, Plymouth gin, a handful of Scandinavian aquavits and bitters and hundreds of wines. Absolut is believed to represent roughly half of the company’s sales — USD 1.48 billion in 2006.

The biggest single market for Absolut is the U.S., where it is the top imported vodka. It is also growing quickly in Brazil, Canada, Britain and Germany.

Analysts estimate that the company could be worth between USD 5 billion and USD 6 billion.

The centre-right administration has asked for parliamentary permission to sell the world’s third-biggest spirits maker, along with mortgage lender SBAB and Sweden’s largest real estate firm Vasakronan.

It was not clear, however, if the government would opt for a direct sale or a stock market listing.

The government has given no timeline for the sale, but there is a strong likelihood that Parliament will provide its approval before the summer 2007.

According to media reports, the government hopes that the sales push will raise 150 billion Swedish crowns (USD 21.2 billion) for debt reduction over three years but analysts believe it could fetch much more.

It is not just the usual suspects that are bidding for Vin & Sprit. It is believed that private equity funds are also eyeing Vin & Sprit. Nevertheless, armchair strategists reckon that U.S. holding company Fortune Brands, the faucets-to-golf balls consumer brands company, could be the most likely buyer. The drinks arm of Fortune Brands (brands include Jim Beam, Sauza, Courvoisier, Marker’s Mark) already has close ties with Vin & Sprit through a joint-venture called Future Brands, Absolut’s U.S. distributor, while Vin & Sprit owns 10 percent of Fortune’s Beam Global Spirits & Wine.

Bermuda-based Bacardi has been the most bullish candidate so far. In an interview with the London newspaper Financial Times on 4 March 2007, Bacardi’s Chief Executive Officer, Andreas Gembler, said that Absolut would be a terrific fit for Bacardi. However, Gembler did not like the option of a stock market listing for Vin & Sprit. He was quoted as saying that Bacardi has absolutely no problem in financing any deal of this size with the help of its banks.