Eichhof brewery to be sold to Heineken
Sixteen years after the fall of the Swiss beer cartel and eight years after the sale of Feldschlösschen to Carlsberg, the last of the large Swiss breweries is to change hands.
If you need any more proof that cartels ill prepare their members for the rough winds of the free market, look no further than Switzerland. One by one they have fallen into the hands of foreign brewers. It’s not that they needed pushing very hard. In many cases the major shareholders were advanced in years and had to worry about succession. Then they were highly diversified, out of coincidence rather than design. They also owned large chunks of real estate – as one does in Switzerland – and had interests in industries which had nothing to do with brewing. In this respect the Lucerne-based Eichhof group is typical of Swiss brewers before the fall of the cartel. Although the announcement of the sale on 10 April 2008 was met with a huge outcry by nationalist Swiss politicians, trade unionists and some consumers, the real surprise is not the sale in itself but the fact that Eichhof has lasted out for so long.
Eichhof brewery is the last of the large Swiss breweries to be sold to a foreign brewer. If all goes well – and there are certain “ifs” still to be solved – Heineken will take control of it in the third quarter of 2008. Heineken already has a brewery in Switzerland – the Calanda brewery in Chur, located in the German speaking part of the alpine republic. Through the takeover of Eichhof Heineken will be able to bolster its number two position in the market behind Carlsberg (Feldschlösschen). The Eichhof brewery in Lucerne has a production capacity of 400,000 hl and in 2007 sold 361,000 hl of beer domestically. The company has an estimated 10 percent market share of the Swiss beer market. It brews its own eponymous beer – Eichhof – and other brands under licence. Soft drinks and wine account for 45 percent of total volumes. Heineken’s market share will rise to 23 percent from currently 13 percent if the deal is clinched.
The sale of the Eichhof group came as a surprise to the Swiss. The stock market-listed Eichhof-Gruppe has been operating successfully and achieved two thirds of its CHF 309 million (EUR 191 million) turnover with the production and sale of beverages.
Eichhof’s other business division is colour metrics. Its subsidiary Datacolor will be spun off after the sale of the beverages business and floated on the stock exchange. The real estate portfolio valued at CHF 100 million (EUR 62 million) is to be sold.
Heineken says it will spend CHF 290 million (EUR 180 million) on Eichhof’s beverages division, which equals 12 times 2007 EBITDA. It is amazing that none of the business commentators picked up on this. After all, Heineken is only acquiring a mainstream brand. Perhaps the analysts thought this whole deal “peanuts” or they did not bother to look too closely at the Swiss beer market, which is, after all, a tiny market in the grand scheme of things. Total beer consumption in 2007 was 4.4 million hl with a per capita consumption of approximately 57 litres.
Heineken has promised that it will keep the brewery in Lucerne and its 450 jobs going.
In its 2006/2007 financial year (ended September 2007) Eichhof achieved a turnover of CHF 309 million (+4.7 percent) and a profit of CHF 18.3 million (+16.6 percent). Eichhof’s major shareholders and the Eichhof Holding, representing 49 percent of the shares, have already signalled their approval of Heineken’s offer. Now it is all up to the individual shareholders who can vote on the issue at an Extraordinary General Meeting (EGM) to be held on 18 June. The deal is also subject to regulatory approval.
Heineken has made the transaction subject to three conditions: approval of the demerger of the beverage division by Eichhof Holding’s shareholders at the EGM; the tender of at least 66.67 percent of the entire share capital of Eichhof Getränke Holding within the tender offer period, plus approval by the Swiss competition authority.
The main shareholder of the Eichhof Group is the family Dubach that controls 32 percent of the shares. The 65-year-old Werner Dubach, who also headed the Board, has already resigned from his post.
With almost 70 percent of the Swiss market soon to be controlled by Carlsberg and Heineken, the Schützengarten brewery from St. Gallen (143,000 hl) will become the largest independent brewer.
