SCM To Sell Its Beer Assets?

System Capital Management (SCM) announced yesterday that it had created a new company, UBH Limited (Ukrainian Brewery Holding), to increase the effective management and transparency of the group’s beer holding. According to a press release by SCM, on December 22, Sarmat’s shareholders voted to restructure the company’s board of directors. UBH controls 99.9% of Sarmat.  Alexander Romanov: The most probable reason for the restructuring is to prepare SCM’s brewery business for sale. Sarmat is Ukraine’s #4 brewer, but it is losing its market share (from 13.2% in 2005 to 11.2% in 2006E). Sarmat brands target only the low-price/economy segment which is expanding at a slower pace than the mainstream and premium segments. Heineken or SABMiller are believed to be the most probable buyers. Both have already benefited from entering Russia and are looking to enter the rapidly growing Ukrainian beer market (expected 18% CAGR over 2006-2008). Sarmat’s value comes from its existing production sites and distribution chain, whereas the brand will most likely be phased out after the acquisition. Sarmat owns breweries in Lugansk, Dnipropetrovsk, Poltava, Donetsk, and Crimea. Its Net sales in 1H06 were USD 69.8 mln., net loss – USD 0.9 mln.