September 11, 2006

Sapporo's takeover of Sleeman leaves little in local hands

by Rob Maguire

The Dominion - http://www.dominionpaper.ca

Trouble is brewing for Canadian beer makers as the trend towards foreign ownership continues unabated. Sleeman Breweries has accepted a buyout offer of $17.50 per share from Sapporo Breweries of Japan, valuing the deal at nearly $400 million.

The last of Canada's three large breweries to accept foreign ownership, Sleeman is strongly advising shareholders to approve the agreement. Analysts believe approval to be highly likely as the offer represents a 50 per cent premium over the price of Sleeman shares on May 11, the day before Sleeman announced it was seeking a buyer. Both companies expect the deal to close by mid-October.

Controlling seven per cent of the domestic beer market, Sleeman's buyout will reduce the market share of Canadian-owned breweries to roughly five per cent. This is all "part of a pattern in Canada," notes Robb Steward of Dow Jones Newswires, one that saw corporate beer giants Molson and Labatt effectively cede control over the past several years to the Colorado-based Coors, and Belgium's InBev, respectfully.

In a bid to reduce costs and drive up profits, Sleeman has cut about one-fifth of its labour force over the past year, including 40 jobs only days before the announcement of the purchase agreement. When asked by reporters if the change in ownership would mean further job cuts, Sleeman CEO John Sleeman was non-committal. "I don't think it's fair to paint Sapporo into a corner and say that everyone is going to keep their job," Sleeman told the Toronto Star.

According to industry sources, Molson Coors, Labatt and Dutch brewer Grolsch were also interested in the acquisition. However, Sleeman already brews and distributes Sapporo's beer in Canada, and there is speculation that Sapporo was eager to purchase Sleeman in order to prevent their existing arrangement from being annulled by a new owner.