Pabst on block?

Newspaper reports beer marketer wants to sell off brands

Nov 4, 2003 - The New York Post reports that Pabst Brewing, the fourth-largest beer marketer in the country, is on the sales block. Its story says that Pabst, long associated with Milwaukee but now based in Texas, has hired Merrill Lynch to run an auction for a possible sale of the business.


A Pabst spokeman didn't returns calls for comment on the report that the investment bank has already begun sending out an offering memorandum to potential buyers.

Pabst no longer brews its own beer, contracting out production to Miller Brewing Co. However, the company retains ownership of the Pabst Blue Ribbon brand and 28 others, and it markets their products. The Pabst Blue Ribbon brand has been enjoyed recent attention for its popularity with urban hipsters, and sales have climbed after 25 years of decline.

As well as PBR, Pabst brands include Old Milwaukee, Old Style, Lone Star, Schlitz, McSorley's, Olympia, Stroh's and Colt 45.

The company has roughly $575 million in sales and generates about $60 million in operating cash flow, according to sources familiar with the financials. It also carries $150 million of debt as well as about $150 million of pension and retirement obligations.

The auction is said to target both beer companies as well as leveraged buyout firms. However, sources familiar with the process say there is likely to be limited interest from corporate bidders, who may not be interested in the declining brands.

"The beer industry is already pretty consolidated, but most industry observers think there's still another wave of consolidation to come," said one potential bidder. "No one wants to be stuck with non-strategic assets because [they] could get in the way of another big [asset] auction."

Instead, Pabst may be a better fit for LBO firms, which often pick up companies with brand names that they can exploit and businesses they can grow. "Ultimately, the goal is to create momentum around these heritage, niche brands and one day take Pabst public," one source said.

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