Legal battle threatens Plzeňský Prazdroj sale

The Pilsen-based association Právovarečné měšťanstvo is questioning the sale of the Czech brewery Plzeňský Prazdroj to the Japanese company Asahi Group Holdings, the news site iDnes.cz has reported.

Photo: Pilsner Urquell

The group has appealed to European Commissioner for Competition Margrethe Vestagler, asking her to suspend the sale, arguing that it has been leading a legal dispute over the ownership of part of its property. Karel Svoboda, the head of the Právovarečné měšťanstvo association, told the news site that they were very concerned about the issue.

Právovarečné měšťanstvo is demanding its property rights for the Měšťanský pivovar brewery in Pilsen, which was built by the association back in 1842 and which is today part of the Plzeňský Prazdroj company, are recognised.

Asahi Group Holdings, Japan’s biggest brewery group, has won the bidding competition to acquire the biggest Czech beer producer in December 2016.

The Group has provisionally picked up the Czech brewer as part of a package of Central European beer makers put up for sale by the multinational SABMiller. This also comprised breweries in Poland, Hungary, Romania, and Slovakia with the price tag for the job lot put at 7.3 billion euros (around 197 billion Czech crowns).

The sell-off was forced on SABMiller by the European Commission as part of the price for its takeover by Anheuser-Busch InBev, which Brussels feared would create dominant positions and curb competition on a series of European markets while commanding around 27 percent of the world beer market.

If the Japanese offer completes the course, then Asahi Group Holdings would, according to sources, appear to have comfortably outbid a rival offer for the brewery by the richest Czech, Petr Kellner, of the PPF group in partnership with the Czech-Slovak bank J&T.

Asahi earlier picked up some of SABMiller’s assets as part of the group divestment, for example, the Italian beer brand Peroni and Dutch brand Grolsh. This was already seen by analysts as a indication that Asahi was willing to spend freely and pick up European assets as part of its worldwide expansion.

In the past, Asahi was reported as one of the potential bidders for Prague’s Staropramen brewery, the second biggest in the country, when it was put up for sale in 2012. The eventual winner of that contest was Molson Coors. Staropramen though is licensed to Asahi dry to sell on European markets, it’s one of the Japanese brewery’s biggest and best selling brands.

Asahi is reckoned to have exhausted most of the beer market possibilities on its Japanese domestic market by the late 1990s. It has since expanded into drinks, snacks, and food in Japan, and has expanded abroad through an aggressive merger and acquisition policy. It began life in 1889 after borrowing largely from German beer know-how and technology.

Plzeňský Prazdroj’s profits for last year, ending in March, rose five percent to 3.7 billion crowns with turnover climbing slightly slower to around 14.4 billion crowns. SABMiller had pinpointed Plzeňský Prazdroj to become one of its major brands worldwide, though many analysts believed that all the promotion and marketing promises were only partially fulfilled.

The Plzeň brewer has been in Japanese hands before, though these are not likely to be happy memories. Plzeňský Prazdroj’s majority owner was at one stage in the hands of the investment group Nomura, though it always openly admitted that this was never a long-term strategic investment and that it would quit once the price for getting out was right. The latest transaction should be completed by December 2017.