December 11, 2007 / 10:21 AM / 12 years ago

Sweden to sell Absolut vodka maker via auction

STOCKHOLM (Reuters) - The Swedish government will auction off Absolut vodka maker Vin & Sprit (V&S) VSG.UL next year in the boldest step yet in the country’s record privatisation scheme.

Empty bottles are moved onto a production line at the Absolut bottling facility in Ahus in this photo taken July 17, 2007. The Swedish government will auction off Absolut vodka maker Vin & Sprit next year in the boldest step yet in the country's record privatisation scheme. REUTERS/Bob Strong

Analysts said V&S — the crown jewel of the state-owned assets up for sale and producer of one of the world’s top vodka brands — could fetch up to $7 billion (3.41 billion pounds).

Financial Markets Minister Mats Odell told a news conference the government was contacting interested parties on Tuesday and that price would be the paramount consideration.

Only bids for the whole of V&S will be considered, Odell added, saying that while he believed Absolut production would stay in Sweden, this was not a requirement for the sale.

“It will be the one who pays the highest price and the one who after a full assessment shows that it offers the best (deal) for the Swedish households,” he told reporters.

V&S, founded 90 years ago, has already drawn interest from U.S.-based Fortune Brands FO.N, France’s Pernod Ricard (PERP.PA), Bacardi, Britain’s Diageo (DGE.L) and Sweden’s Investor (INVEb.ST) in partnership with private equity firm EQT.

Investor and Pernod reiterated their interest on Tuesday.

“We have said for several weeks that we are waiting for the auction to start,” said Pernod spokesman Francisco de la Vega.

The V&S sale is part of a push by the centre-right government to raise 200 billion crowns (15.2 billion pounds) by paring down its portfolio of corporate assets.

The sales list also includes wholly owned mortgage lender SBAB SBAB.UL and real estate firm Vasakronan VASA.UL, along with stakes in bourse operator OMX OMX.ST, bank Nordea NDA.ST and telecom operator TeliaSonera TLSN.ST.

Odell said OMX, which has recommended a bid from Borse Dubai launched in partnership with U.S. player Nasdaq (NDAQ.O), will likely follow V&S as the next government transaction.

The privatisation looked on track in September but the resignation of two top advisers over a trading scandal at their previous employer raised some doubts about the schedule.

Opinion polls also have suggested a growing disenchantment among voters with the plan, which the government set out during its winning election campaign in 2006.

But Odell said he saw no reason to alter the timetable.


Robert Berqqvist, chief economist at SEB, said the government was taking a careful approach to privatisation both because of market conditions and political considerations.

“They cannot afford any mistakes concerning privatisation activities,” Bergqvist said.

He said tough international credit conditions may constrain the field of bidders.

“Some companies that would like to participate, they need to get access to funds. And in some cases it’s difficult, at least these days, to get access to money,” Bergqvist said.

Odell said the quality of the companies put up for sale would insulate buyers against the impact of global market turmoil.

He has left all options open for the sale of the other assets, but he said an analysis by financial adviser Morgan Stanley had suggested an auction was the best route for V&S.

Analysts agreed that an auction would fetch more than methods such as a bourse listing, would cost less and would carry a lower political risk.

“If they floated it and it was mispriced, the political price would be higher,” said analyst Trevor Stirling at Sanford Bernstein.

Bergqvist agreed.

“No one can say afterwards that you didn’t get the right price if you have this auction procedure.”

Stirling saw a $6 billion price tag for V&S and estimated a deal could navigate the regulatory process by the end of 2008.

Absolut, with its distinctive clear-glass bottle, is one of Sweden’s most famous exports, with an advertising strategy that has spawned more than one marketing book.

Nearly 89 million litres of the vodka were sold in 126 countries last year.

V&S also owns Plymouth gin and Cruzan rum, made on St Croix in the Caribbean.

The unit that includes Absolut, V&S Absolut Spirits, is the biggest with sales of 4.4 billion crowns in the first nine months of 2007. The Wine and Distilleries units reported 557 million and 1.4 billion crowns of revenue respectively.

Additional reporting by Johan Sennero, Jerker Hellstrom and Adam Cox; Editing by David Cowell

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