Blavod Black Vodka has confirmed today that it is in advanced negotiations to acquire its US competitor Extreme. Blavod, which is listed on the Alternative Investment Market (AIM), says the proposed acquisition will be classified as a reverse takeover under AIM rules. The acquisition will be subject to shareholder approval.

Following the purchase, Extreme will own new Blavod shares comprising 40% of the issued share capital as enlarged by the acquisition, before taking into account the new Blavod shares to be issued pursuant to a proposed placing and open offer to raise approximately £8m.

In a statement, Blavod said that additional deferred share consideration will be payable to Extreme upon certain price thresholds being reached. Although these negotiations are still to be finalised and there can be no assurance that this transaction will proceed, the company hopes that it will be able to announce the final terms of the acquisition and the placing and open offer later this month.

The US remains the only significant foreign vodka market in which Blavod has yet to make inroads and the company's directors believe that it is its single biggest market opportunity. Extreme's US distribution capability, its relationship with its US distributors and its growing profile in the country make the acquisition attractive to Blavod. In addition to gaining the benefits of Extreme's growing market share in the US, Blavod will also gain access to Extreme's US distribution network allowing Blavod to be exposed to a large and growing market that Blavod has not to date been in a position to exploit.

The £8m, before expenses proposed to be raised through the placing and open offer will be used to strengthen the balance sheet of the enlarged group and to fund the costs associated with sales and marketing, capital expenditure and trade mark protection. It will also be used to fund debt repayment of approximately $1 million and general working capital requirements.

Reports in late November estimated the acquisition to be worth around £5m. This was not confirmed by Blavod.