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Absolut vodka could go for knock-down price

Published:  23 July, 2008

Vin & Sprit, the Swedish state company, has started to mount its defences against predators who are targeting Absolut vodka when the Stockholm government privatises the group, possibly later this year.

Bengt Baron, Vin & Sprit's chief executive, said in an interview with the Financial Times that the Swedish government is rushing the sale of the multi-billion-dollar drinks company, and is in danger of selling it too cheaply. Analysts say Vin & Sprit is worth about $6 billion, a price-tag Baron said is conservative'. It is one of six companies to be sold in the next three years by Sweden's centre-right government as part of its privatisation drive.

Baron said the government's ideological drive to reduce the state's role in industry could mean it would not get the best price for Vin & Sprit, which also has extensive spirits interests in the Nordic countries and Eastern Europe, as well as a large distribution arm in Sweden. The government needs to do its homework,' Baron is quoted as saying. It needs to ask what it gives up if it goes fully ideological and what it can get if it gives up ideology for long-term value gain.'

He said he was not against a merger in the future, but said the government should examine all strategic options before agreeing a sale to a competitor. I don't believe that Vin & Sprit is at its peak,' he added.

Vin & Sprit is one of the 10 biggest companies in the international alcohol industry and the announcement of its impending privatisation has already prompted some of the leading drinks groups to express interest in it. They include Fortune Brands, with which V&S has joint venture interests, Bacardi, Diageo, Pernod Ricard and Anheuser Busch.

Investment bankers are queuing up to offer the Swedish government possible solutions for the sale of Vin & Sprit, and Baron warned that it is in danger of paying too much attention to transaction-driven voices'. He pointed out that Vin & Sprit is growing strongly as an independent company, and said that he was working to ensure this growth continued.

Since 1996, Vin & Sprit's operating profits have increased 10-fold and sales have tripled. Last week, it reported that operating profit last year rose 10% to $326 million, on an 8% increase in sales.