Poland: Denmark’s second-largest beer maker, The Danish Brewery Group A/S (Bryggerigruppen) announced on April 4 it has entered into an agreement with the significant regional Polish brewery ”Browary Polskie Brok-Strzelec S.A.” to acquire the key brewery-related assets and activities from this company. The assets and activities in question will be acquired by The Danish Brewery Group’s subsidiary Faxe Polska Sp. z o.o.; however, one block of shares (some 22%) of ”Perla-Browary Lubelskie S.A.” will be acquired directly by The Danish Brewery Group A/S.

Receivables, certain fixed assets of no relevance to brewery activities as well as all liabilities and equity will not be acquired from ”Browary Polskie Brok-Strzelec S.A.”, posted Bryggerigruppen.

The acquisition price of the assets and activities acquired (excluding the Perla-Lublin Breweries shares) amounts to PLN 119.5 million (equal to DKK 217 million) excluding inventories of raw materials, semi-manufactured products and finished products, which will be acquired at actual inventory levels upon final realisation of the transaction. As previously mentioned, no debts or liabilities will be acquired.

The Danish Brewery Group A/S will pay a total of PLN 58.3 million (equal to DKK 106 million) for the block of some 22% shares of ”Perla–Browary Lubelskie S.A.” acquired directly from ”Browary Polskie Brok-Strzelec S.A.” and an additional shareholding of some 26% in the same company acquired from a Polish financial institution. The total investment amounts to PLN 177.8 million (equal to DKK 323 million or USD$56 million).

The final realisation of the above transaction is subject to, among other things, approval by the Polish competition authorities. This approval is expected to be obtained during April 2005.

Browary Polskie Brok-Strzelec S.A. (Brok-Strzelec) operates two breweries in Poland. The Jedrzejow brewery situated in the Krakow area primarily produces the regional ”Strzelec” and ”Rybnicki” brands, whereas the Brok brewery situated in Koszalin in the Northern parts of Poland between Stettin and Gdansk produces primarily ”Kanclerz” and ”Brok Sambor”. The products ”Brok Sambor Export”, ”Cooler Lemon” and ”Crystal Ice” are sold and distributed nationally. In 2004 total net revenue amounted to PLN 71 million (equal to DKK 129 million) based on sales of some 0.5 million hectolitres. The loss before tax for 2004 was highly unsatisfactory primarily in consequence of the company’s difficult financial position due to, among other things, considerable investments. The production capacity of the two breweries acquired totals some 1 million hectolitres/year. The Polish beer market, which grew by 4% in 2004, is expected to continue increasing similarly in future years.

Through the transaction, The Danish Brewery Group A/S will hold some 48% of the shares of Perla-Browary Lubelskie S.A. (Perla). The remaining 52% of the share capital will be controlled by a Polish businessman. Perla has recorded positive earnings over the years with an EBIT margin in the region of 5.5- 9.8 per cent the past 3 years. Perla is a regional brand, which is strong in the Lublin area, where it holds a market share of some 40%. In 2004 the company reached net revenue of some PLN 118 million (equal to some DKK 215 million) based on sales of some 0.6 million hectolitres.

Through the acquisition of Brok-Strzelec, The Danish Brewery Group will gain access to two regional brand positions in Poland: on the Baltic seaboard and not least in the Krakow/Upper Silesia area.

The acquisition of Brok-Strzelec is expected to enable considerable synergies through joint purchasing and through coordination between the sales and distribution activities of Brok-Strzelec and Faxe Polska, respectively. Furthermore, it is estimated that standardisation of administrative systems will be required.

The establishment of a financially strong entity in Poland in itself is expected to strengthen Brok-Strzelec considerably. The Danish Brewery Group’s future head office for the Polish activities is expected to be established in Krakow.

The activities acquired from Brok-Strzelec are expected to be included in the financial statements of The Danish Brewery Group as of 1 May 2005. The acquisition of these activities will affect the financial statements of The Danish Brewery Group for 2005 negatively by an estimated DKK 15 million, partly because it is anticipated that it will not during 2005 be possible to achieve an operating profit, neither for Brok-Strzelec nor for the total Brewery Group activities in Poland, and partly due to restructuring costs in connection with coordination of the Group’s Polish activities. Within 3 years, the Group’s Polish activities are expected to meet the requirements made in MACH II with respect to return on invested capital and EBIT margin.

“Irrespective of the expected losses in 2005, the acquisition of the Brok-Strzelec activities does not give rise to changing the expected profit before tax of The Danish Brewery Group for 2005, which is expected to remain unchanged at DKK 290-340 million,” Poul Møller, the CEO of The Danish Brewery Group A/S mentioned on April 4.

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