US/RUSSIA: CEDC says Russian Standard not only option
CEDC in talks with Russian Standard
Central European Distribution Corp has said that Russian Standard's proposal is one of several "options" it is exploring.
Russian Standard plans to increase its stake in Central European Distribution Corp (CEDC) to 32.99%, from 9.9% currently, CEDC said in a stock filing this week. In exchange for swallowing more shares, the Russian vodka distiller has offered emergency debt funding, as well as distribution rights for its namesake vodka and Gancia wine brands.
The Russian company has given CEDC until 8 February to respond. Some analysts believe that the Eastern Europe-focused drinks firm's weak finances mean it will be hard-pressed to refuse a deal.
However, for now, CEDC remains coy on its intentions. When contacted by just-drinks, a group spokesperson said today (3 February): "We welcome its (Russian Standard's) continued interest in our company and we will certainly consider this proposal, as well as other options the company is currently exploring, for the best benefit of our shareholders."
Asked if the two companies have engaged in talks, she said that "CEDC has been in ongoing discussions with Russian Standard for the last few months". She declined to comment on what other options the firm is examining.
A spokesperson for Russian Standard declined to comment on the progress of the talks. He would only say that some kind of further announcement is expected by the 8 February deadline.
The distiller's chairman, Roustam Tariko, said in a letter to CEDC, dated 1 February, that his company is willing to provide a "backstop credit facility" to help the distributor pay down US$207m of outstanding debt due in 2013. Late last year, Moody's warned that CEDC may default on its debt.
In addition to debt funding, Tariko said that Russian Standard's portfolio and efficiency would benefit CEDC. "The premium portfolio of Roust is highly complementary to CEDC’s existing portfolio of mainstream and low-premium brands," he said.
Russian Standard has proposed to acquire up to 32.99% of CEDC in two transactions. The first would see Russian Standard swallow $103m of CEDC debt due in 2013 for CEDC common stock at around $7 per share. In the second, Russian Standard would offer "assets at a fair value to be determined".
Yesterday, CEDC's share price rose by 18% on the NASDAQ exchange.
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