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UPDATE 1-Diageo pulls out of Stock Spirits auction -sources
April 26, 2011 / 11:22 AM / 6 years ago

UPDATE 1-Diageo pulls out of Stock Spirits auction -sources

* Leaves IPO as most likely option

* Diageo shares down 0.2 percent

(Adds detail, background)

By David Jones

LONDON, April 26 (Reuters) - Diageo (DGE.L), the world’s biggest spirits group, has pulled out of the sale process for Stock Spirits, one of central Europe’s biggest drinks companies, sources familiar with the matter said on Tuesday.

Price was the main stumbling block, with the owner of Stock Spirits, U.S. private equity group Oaktree Capital, said to be looking for around 500 million pounds ($823 million).

Diageo’s withdrawal leaves an initial public offering (IPO) the most likely future option, the sources said.

“The issue was very much one of valuation. If the seller’s idea of a price comes down then Diageo may rejoin the sale process,” said one source familiar with the matter.

Diageo would not comment.

Its shares were down 0.2 percent to 1,201 pence by 1050 GMT, in a slightly firmer London stock market.

Diageo, the maker of Johnnie Walker whisky and Smirnoff vodka, was the main interested trade buyer looking at the British-headquartered group which makes Czysta de Luxe, an upmarket Polish vodka and also Stock Prestige vodka.

Diageo has been showing renewed interest in emerging markets as Chief Executive Paul Walsh expects these faster-growing regions to make up half of group sales in five years, from about a third at present.

In February, Diageo bought Turkey’s biggest spirit group Mey Icki, maker of national drink raki and local vodkas, for 1.3 billion pounds. It is currently awaiting Chinese regulatory approval to raise its stake in China’s No 4 spirits group Sichuan Shui Jing Fang. [ID:nLDE71K0A4]

Last year, Los Angeles-based Oaktree hired Credit Suisse to look at options for Stock Spirits which included a possible London-based flotation, or a sale to private equity firms or to rival drink companies. But private equity interest has dried up and Diageo was seen as the main trade buyer.

Earlier this month, Stock Spirits appointed two non-executive directors to its board, which is led by non-executive chairman and ex-Diageo executive Jack Keenan.

This was seen as a move to strengthen the board, ahead of a possible flotation.

Stock Spirits was established in 2007 when Oaktree merged the Czech business Stock with Polmas Lublin, its Polish counterpart, which Oaktree had acquired a year earlier.

Analysts estimate Stock Sprits is the market leader in the Polish $2.3 billion vodka market with a 27 percent share compared with Central European Distribution Corp CEDC.O at 26 percent, Belvedere BEVD.PA at 19 percent, Pernod Ricard (PERP.PA) at 11 percent and Diageo less than 2 percent.

Stock Spirits is also the No 1 vodka group in Italy and the Czech Republic. (Reporting by David Jones; Editing by Mark Potter and Jane Merriman) ($1 = 0.6076 pound)

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