CZECH REPUBLIC: Pernod-Ricard loses Becherovka option

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The Czech government has halted the privatisation of Jan Becher-Karlovka Becherovka (JBKB), reversing its 1997 decision to sell control of the nation's second largest spirit producer to the French group Pernod Ricard.

The abandoning of the distillery's privatisation could mean a new tender and a new owner for the government's remaining 59% stake. Pernod Ricard, through its SALB subsidiary already controls 30% of JBKB.

Until the government decides how it will sell its stake in the drinks company, the shares will remain held by the National Property Fund said government press spokesman Libor Roucek following a September 17 cabinet meeting. No mention was made about forcing Pernod Ricard personnel out of JBKB management.

It seems the CZK 1.324 billion () price tag for the 59% stake is not the issue. Alan Walden-Jones, chairman of JBKB and lead representative for Pernod Ricard in the Czech Republic said the French company was willing to pay the price.

But there have been disagreements over the Pernod Ricard demand that the government guarantee its purchase against claims by a local entrepreneur Zdenek Hoffmann that he had inherited the recipe and the right to make the famous herb liqueur, Becherovka - JBKB's leading brand.

Hoffmann surfaced with his alleged inheritance in 1998 and began production of his own Original Johann Becher in neighbouring Slovakia. Slovak authorities have been unwilling to issue an injunction against Hoffmann prior to a final ruling in the Czech Republic. And while JBKB has been awarded the trademark, there has not yet been a ruling on the authenticity of Hoffmann's inheritance.

"The reason for the government's decision was the fact that SALB was not willing to meet the terms of the privatisation agreement," Czech finance minister Jiri Rusnok said.

If a new tender is opened, the two likely names at the top of the list would be Pernod Ricard and market leader Stock Plzen, owned by the German Eckes. "We continue to say that we would be willing to take another look," said Stock managing director Martin Petrasek.

The initial privatisation of Jan Becher was a highly political affair. The winning bid was submitted by SALB, a joint venture between a local aristocrat/politician Karl Schwarzenburg, Patria Finance, and Pernod Ricard. The joint venture paid the state CZK 673m for a 30% stake, together with the option to purchase the states remaining 59% in 2001 after meeting certain trademark protection and production criteria.

The privatisation has remained a contentious issue ahead of next year's elections. A tabloid closely linked to former prime minister Vaclav Klaus has accused SALB of asset stripping and recommended that the privatisation be halted.

Last week Pernod-Ricard bought both Schwarzenburg and Patria Finance out of SALB, taking full control of the company

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