* To raise 52 mln pounds from new shares to reduce debt
* Majority-owner Oaktree Capital Management to reduce stake
* Plans October London stock market debut
* Expecting to be valued at 600-700 mln pounds - source
By Kylie MacLellan and Neil Maidment
LONDON, Sept 26 (Reuters) - Vodka maker Stock Spirits plans to sell at least a quarter of its shares next month in a London listing which could value it at up to 700 million pounds as it looks to expand across eastern Europe.
The British-based firm, the biggest vodka producer in Poland and the Czech Republic, said on Thursday it would raise 52 million pounds by selling new shares to pay down debt.
Both majority-owner Oaktree Capital Management, the U.S. private equity group, and company management will also sell shares in the offering, although Oaktree will remain the group’s largest shareholder following the float.
The company was hoping to be valued at between 600 million pounds and 700 million pounds ($964 million to $1.12 billion) in the sale, a person familiar with the matter said.
The float provides further evidence that stronger equity markets are helping to revive new listings in London after several years of drought due to the financial crisis.
Listings by British companies as of Sept. 19 had raised $3.9 billion in 2013, a 201 percent increase on the period in 2012.
“We keep our fingers crossed this momentum continues,” Stock Spirits Chief Executive Christopher Heath told Reuters, declining to comment on the company’s potential valuation.
“This (float) is partly to give funds back to Oaktree Capital but more importantly to enable us to structure our balance sheet so that we can make meaningful acquisitions.”
Stock Spirits, whose drinks range from high-end Polish vodka Czysta de Luxe to fruit-flavoured liqueurs and Spanish brandies, was established in 2007 when Oaktree merged Czech business Stock with its Polish counterpart Polmos Lublin, which the private equity group had acquired a year earlier.
Oaktree looked at selling the company in 2011, pursuing a possible deal with the world’s biggest spirits group Diageo and then later considering a listing on the Warsaw bourse before eventually deciding to keep hold of it.
Poland, where per capita spirits consumption in 2012 was 8.5 litres compared to an average of 4.5 litres in some EU countries, is its biggest market, accounting for 60 percent of revenue last year.
Present in five other countries in central and eastern Europe, Heath said the region offered opportunities for expansion, including in Ukraine, Serbia and Bulgaria. Spirits consumption in the countries in the region where the firm is not yet active was equivalent to 38 billion shots in 2012.
“There is a huge market out there that is at the moment dominated by domestic producers, so there is a massive opportunity for us to go out there and acquire some of those businesses,” he said, adding a typical deal size in the region was between 30 million and 60 million euros.
Smaller deals could be done from the company’s cash flow, while larger deals would be initially funded by debt, he added.
Heath said in the countries where the firm wants to move into, three to four domestic producers typically had 50-70 percent market share, with global players like Diageo and Pernod accounting for less than 20 percent.
The company, which aims to position itself in terms of price between value domestic brands and top global imports, said it was also looking at Anglicising the names of some of its brands to help make them more accessible to English speaking countries.
On Thursday it said revenue for the first half of 2013 was 153.1 million euros, up from 134.4 million in the same period last year, while core earnings for the same period were 34.3 million euros compared to 28.5 million euros a year earlier.
At the mid-point of the 600-700 million pound market capitalisation, Stock Spirits would be valued at a multiple of around 9.5 times 2012 earnings, a significant discount to larger international group such as Diageo and Pernod which have trailing price to earnings multiples of 19.1 and 20.1 times respectively, according to Thomson Reuters data.
JP Morgan and Nomura are acting as joint global co-ordinators and joint bookrunners on the initial public offering, while Jefferies is also a joint bookrunner. ($1=0.6224 British pounds) ($1 = 0.7403 euros)