Last large brewery privatization on tap
A 75% stake may be offered to strategic investors in Browary Tyskie Gorny Alask SA, the country's second-largest brewery with a 12% market share.
"It is the last big privatization in this sector," said Zbigniew Gryglas, a project manager in the Privatization Ministry.
Tyskie, which employs 890 people, last year produced 1.2 million hectoliters of beer at its two breweries. The company has already produced 1 million hectoliters this year and will likely meet its goal of 1.5 million hectoliters, Gryglas said.
In 1994, Tyskie turned a zl. 12 million ($5 million) profit on revenues of zl. 100 million ($41.7 million). Tyskie sells 10 kinds of beer, mainly on the domestic market.
Gryglas said that Tyskie's tender will open by mid-September, with a final decision expected by March 1996.
The current plan is to offer 75% of the company to strategic investors, 20% to employees (at a discount), with the state retaining a 5% stake to satisfy restitution claims. Gryglas said that 20% of the shares may be floated on the Warsaw Stock Exchange, limiting strategic investors' share to 55%.
Gryglas declined to speculate on the sale price, but said only it may be comparable to lywiec, which was privatized in 1991 through a zl. 20 million ($8.3 million) public offer. Last year, lywiec had earnings of zl. 21 million ($8.75 million), a jump from zl. 14 million ($5.8 million) the previous year.
Analysts question whether the Tyskie privatization will be as successful as Okocim and lywiec, two large breweries that trade on the Warsaw Stock Exchange. Okocim made its debut on the exchange in 1992; lywiec, in 1991.
"The market is a lot more demanding right now," said Dariusz Piszczatowski, manager of foreign and institutional client services at the Polski Bank Rozwoju brokerage office. "The market right now is not going to swallow anything that's presented to it."
Piszczatowski and other analysts noted that Okocim and lywiec initial public offerings were grossly underpriced.
Okocim shares were priced at zl. 1.9 ($0.79) when they first appeared on the exchange in 1992 and lywiec at zl. 10 ($4.17) back in 1991. But at that time there were few companies on the exchange and all were grossly undervalued, said Piszczatowski. Since then a large influx of foreign capital into Poland has driven up prices, he said.
Today, both shares are a better reflection of valuation, Piszczatowski said. This Monday, Okocim closed at zl. 78 ($32.50) and lywiec at zl. 191 ($79.58).
Both shares are trading at multiples of 20 times earnings, comparable to similar-sized breweries in more developed markets, noted Martin Gollner, a London analyst with Nomura Research Institute. But investors today would not be willing to pay more than 12 times earnings for shares of Tyskie, he said. (At 12 times earnings, Tyskie's sale price would be zl. 144 million, or $60 million.)
Nevertheless, Gollner said he expects that some of the big players already present in Poland's beer market looking to expand capacity may be interested in buying into Tyskie, whose name is well-known throughout Poland. In addition, it's cheaper to buy an existing brewery and upgrade its facilities than to build from scratch, he said.
lywiec, for example, has its eyes on other breweries. "Definitely they want to expand their market share and they want to do it fast," Gollner said. "The easy way would be to buy another brewery." And lywiec brand beer is gaining stronger recognition throughout the country, he said.
Gollner noted that lywiec is well-capitalized o it had cash reserves of zl. 58 million ($26.7 million) at the end of last year o and has very little debt, putting it in a strong buying position. lywiec is 24.9% owned by Heineken, a Dutch company. Tyskie may be the last chance for foreign companies not already here to get a foothold in the Polish market, Piszczatowski said. "It's the last potential for the development of the beer market, before somebody else gets their hands on it."
The Privatization Ministry is also selling off up to 75% of its stake in two smaller breweries, the Zaklady Piwowarskie w Lezajsku SA and Gornoslaskie Zaklady Piwowarskie SA. Gryglas said the breweries all need capital, technical know-how and marketing expertise. The two smaller breweries will likely be privatized before the end of this year, Gryglas said.
The Lezajsk brewery turned a zl. 300,000 ($135,000) profit on revenues of zl. 76.8 million ($32 million) in 1994, employs over 900 people at four breweries and last year produced 515,000 hectoliters, just about its annual capacity. Gryglas said the company has strong regional markets but needs technical upgrading, pasteurization, to lengthen product shelf life.
Gornoslaskie, which owns six breweries, generated a net profit of zl. 3.2 million ($1.4 million) on revenues of zl. 74.8 million ($32 million) in 1994. Last year it produced 708,000 hectoliters of beer, almost its production capacity. Gryglas said the company has strong regional markets but also needs technical upgrading.
According to Gryglas, these companies, once privatized, could give the country's top brewers a run for their money.
"It's quite easy to join the top," he said. "They need investors, they need some know-how and a new marketing policy and they can join the five or six biggest."
"It is the last big privatization in this sector," said Zbigniew Gryglas, a project manager in the Privatization Ministry.
Tyskie, which employs 890 people, last year produced 1.2 million hectoliters of beer at its two breweries. The company has already produced 1 million hectoliters this year and will likely meet its goal of 1.5 million hectoliters, Gryglas said.
In 1994, Tyskie turned a zl. 12 million ($5 million) profit on revenues of zl. 100 million ($41.7 million). Tyskie sells 10 kinds of beer, mainly on the domestic market.
Gryglas said that Tyskie's tender will open by mid-September, with a final decision expected by March 1996.
The current plan is to offer 75% of the company to strategic investors, 20% to employees (at a discount), with the state retaining a 5% stake to satisfy restitution claims. Gryglas said that 20% of the shares may be floated on the Warsaw Stock Exchange, limiting strategic investors' share to 55%.
Gryglas declined to speculate on the sale price, but said only it may be comparable to lywiec, which was privatized in 1991 through a zl. 20 million ($8.3 million) public offer. Last year, lywiec had earnings of zl. 21 million ($8.75 million), a jump from zl. 14 million ($5.8 million) the previous year.
Analysts question whether the Tyskie privatization will be as successful as Okocim and lywiec, two large breweries that trade on the Warsaw Stock Exchange. Okocim made its debut on the exchange in 1992; lywiec, in 1991.
"The market is a lot more demanding right now," said Dariusz Piszczatowski, manager of foreign and institutional client services at the Polski Bank Rozwoju brokerage office. "The market right now is not going to swallow anything that's presented to it."
Piszczatowski and other analysts noted that Okocim and lywiec initial public offerings were grossly underpriced.
Okocim shares were priced at zl. 1.9 ($0.79) when they first appeared on the exchange in 1992 and lywiec at zl. 10 ($4.17) back in 1991. But at that time there were few companies on the exchange and all were grossly undervalued, said Piszczatowski. Since then a large influx of foreign capital into Poland has driven up prices, he said.
Today, both shares are a better reflection of valuation, Piszczatowski said. This Monday, Okocim closed at zl. 78 ($32.50) and lywiec at zl. 191 ($79.58).
Both shares are trading at multiples of 20 times earnings, comparable to similar-sized breweries in more developed markets, noted Martin Gollner, a London analyst with Nomura Research Institute. But investors today would not be willing to pay more than 12 times earnings for shares of Tyskie, he said. (At 12 times earnings, Tyskie's sale price would be zl. 144 million, or $60 million.)
Nevertheless, Gollner said he expects that some of the big players already present in Poland's beer market looking to expand capacity may be interested in buying into Tyskie, whose name is well-known throughout Poland. In addition, it's cheaper to buy an existing brewery and upgrade its facilities than to build from scratch, he said.
lywiec, for example, has its eyes on other breweries. "Definitely they want to expand their market share and they want to do it fast," Gollner said. "The easy way would be to buy another brewery." And lywiec brand beer is gaining stronger recognition throughout the country, he said.
Gollner noted that lywiec is well-capitalized o it had cash reserves of zl. 58 million ($26.7 million) at the end of last year o and has very little debt, putting it in a strong buying position. lywiec is 24.9% owned by Heineken, a Dutch company. Tyskie may be the last chance for foreign companies not already here to get a foothold in the Polish market, Piszczatowski said. "It's the last potential for the development of the beer market, before somebody else gets their hands on it."
The Privatization Ministry is also selling off up to 75% of its stake in two smaller breweries, the Zaklady Piwowarskie w Lezajsku SA and Gornoslaskie Zaklady Piwowarskie SA. Gryglas said the breweries all need capital, technical know-how and marketing expertise. The two smaller breweries will likely be privatized before the end of this year, Gryglas said.
The Lezajsk brewery turned a zl. 300,000 ($135,000) profit on revenues of zl. 76.8 million ($32 million) in 1994, employs over 900 people at four breweries and last year produced 515,000 hectoliters, just about its annual capacity. Gryglas said the company has strong regional markets but needs technical upgrading, pasteurization, to lengthen product shelf life.
Gornoslaskie, which owns six breweries, generated a net profit of zl. 3.2 million ($1.4 million) on revenues of zl. 74.8 million ($32 million) in 1994. Last year it produced 708,000 hectoliters of beer, almost its production capacity. Gryglas said the company has strong regional markets but also needs technical upgrading.
According to Gryglas, these companies, once privatized, could give the country's top brewers a run for their money.
"It's quite easy to join the top," he said. "They need investors, they need some know-how and a new marketing policy and they can join the five or six biggest."
