* Price of 160 crowns per share at lower end of range
* Firm sells 2.3 mln new shares in first Prague IPO in 3 years
* Existing investors decide not to sell shares they had in offer
* Brewer to raise $20 mln for expansion of network, operations (Adds manager comment, details)
By Jason Hovet
PRAGUE, May 23 (Reuters) - Czech brewer Pivovary Lobkowicz Group priced shares for its stock market listing well below the maximum level previously stated, prompting existing investors to hold on to their stock as they believe the offer undervalues the firm.
In Prague's first initial public offering (IPO) in three years, Lobkowicz set a price of 160 crowns per share. That compared with a maximum of 175 crowns given for retail investors at the start of bookbuilding.
The offer price - at the lower end of the range - led to existing shareholders deciding not to sell the 3.4 million shares they had in the offer.
The company, nevertheless, said it would raise 404.8 million crowns ($20 million) by selling 2.3 million new shares plus an additional 230,000 shares as part of an over-allotment option.
"The current shareholders decided not to sell any shares in the offering - except for the over-allotment shares - because they see the real value of the company higher than the price achieved during the offering," said Antonin Piskacek, head of corporate finance at bank Ceska Sporitelna, which managed the issue. "But the capital increase was well covered."
The company did not provide data on total demand.
The share sale gives the country's fifth-largest brewery group by revenue a market capitalisation of 1.87 billion crowns. The free float after the offering is equal to 19.7 percent of the company's stock, excluding the over-allotment option.
The Czech Republic, home of the original Pilsner lager, has the highest per-capita annual beer consumption rate in the world at 144 litres, but beer drinking is down since the global economic crisis of 2008-09.
Lobkowicz said half the proceeds of the share sale would go to expanding its distribution network by buying new bars and restaurants. It also plans to spend 100 million crowns to acquire a new brewery with annual output of between 80,000 and 100,000 hectolitres, and to boost exports.
Analyst Milan Lavicka, at banking group J&T Banka, said current owners holding on to shares could show they have faith in the company.
"It is too small a company to make some funds or institutional players interested, but for retail shareholders the outcome is quite positive," he said. "Thanks to the low price and the small number of shares subscribed, one can expect there could be interest even after the IPO."
Lobkowicz also said all shareholder loans to the company had been capitalised and as a result the firm's equity increased by 1.8 billion crowns.
"The company was positively surprised by the interest and demand of the investors from the Czech Republic, especially the retail investors," it said in a statement.
The biggest shareholders are Martin Burda and Grzegorz Hota, who held 55 and 30 percent, respectively, before the offering.
Trading in the stock should start in Prague on May 28.
The Czech beer market is dominated by Pilsner Urquell lager maker Plzensky Prazdroj, a unit of SABMiller, Staropramen - owned by Molson Coors - and local units of Heineken. Lobkowicz owns seven Czech breweries which have a share of between 4 and 5 percent of the domestic market.
Lobkowicz produced 854,000 hectolitres of beer in 2013 and posted a net loss of 73.8 million crowns on flat revenue of 1.2 billion, of which a fifth came from exports, according to its flotation prospectus.
$1 = 20.1010 Czech crowns Additional reporting by Robert Muller; Editing by Pravin Char