BUSINESS

Carling goes Australian

THERESA TEDESCO March 9 1987
BUSINESS

Carling goes Australian

THERESA TEDESCO March 9 1987

Carling goes Australian

Fittingly, they closed the deal with a celebratory glass of beer. After more than 48 hours of closed-door meetings in a downtown Toronto hotel last week, Elders IXL Ltd., a $7-billion Australian conglomerate, secured 50.1-per-cent control of Carling O’Keefe Ltd. in a bloodless takeover. Executives at British-based

Rothmans International PLC had notified its Canadian subsidiary, Rothmans Inc. of Toronto, on Feb. 20 that Elders was making an offer for its 10.9 million common shares in Carling, Canada’s third-largest brewer. Within hours Elders’ director of strategy, Andrew Cummins, was flying to Toronto where Rothmans’ officials accepted his formal offer of $18 for each of its Carling shares, trading publicly at $17.62 on Monday, Feb. 23. For Elders, the $196-million deal represented a foothold in the North American beer market. Said John Elliott, Elders’s chief executive officer: “The Canadian purchase is one more step in the process of becoming the largest brewer in the world.”

Melbourne-based Elders, which has operations in beer, wine, food products and financial services, is best known for its Foster’s Lager, which Carling has been producing and selling under licence in Canada since last April. The Australian firm gained notoriety in Canada last year when it made an

aborted attempt to purchase the British food-and-beverage conglomerate Allied-Lyons PLC, which battled with Toronto’s wealthy Reichmann brothers for control of Windsor, Ont.-based distillery Hiram Walker-Gooderham & Worts Ltd.

With its latest purchase, Elders gets Carling’s own beer labels, including

Carling Black Label, Old Vienna, O’Keefe Ale, and the Canadian rights to other names now produced under licence agreements, including Denmark’s Carlsberg and the U.S. beers Miller High Life and Miller Lite. In 1986 those brands gave Carling a 23per-cent share of the Canadian beer market. The deal requires approval from Investment Canada, the federal agency which reviews foreign investments. But Carling was already foreign-controlled—its parent company, Rothmans Inc., is 71-per-cent owned by British-based Rothmans International. And most industry analysts predicted that the change of ownership from one foreign company to another would be approved without trouble.

Rumors had been cirElliott: global

culating in the investment community for months that Rothmans was interested in selling Carling for the right price. Rothmans Inc. had a profit of $21.5 million on revenue of $652.4 million for the nine months ended Dec. 31, 1986, up from $14.7 million in the same period a year earlier. Last October Pierre Des Marais, the former president of Canadair, was named Carling’s chairman and president, and there was speculation among industry analysts that his job was to make the brewery more salable. Under Des Marais, Carling sold off some of its assets, including an Ontario-based winery—Jordan & Ste-Michelle Cellars Ltd.—and Carling Black Label trademark in Britain and Europe. And by the end of the third quarter of 1986, it had a profit of $16 million, almost three times greater than its 1985 earnings for the same period.

Still, most industry analysts agreed that the sale will be good for Carling. For one thing, Elders has a good record in the brewing industry—the company had a profit of $167 million on revenue of $6.5 billion last year. As well, student organizations across Canada have boycotted Carling’s brands over the past decade because of Rothmans’ connections with South Africa. Students are major consumers of beer in Canada and, said one official at Carling, the Rothmans association “sure didn’t help in a tough market that is not expanding.”

Canadians will almost certainly see several new brands of beer as a result of the sale. As owner of Carlton and United Breweries Ltd., Australia’s biggest beer maker, Elders already sells half the beer consumed in that country. It has been looking for opportunities to expand its markets for Foster’s Lager. Said Elliott: “We have got to access markets around the world. We will export Foster’s out of Canada, probably to Asia.” But less certain is the fate of Carling’s nonbeer holdings, including the Canadian Football League’s Toronto Argonauts and the National Hockey League’s Quebec Nordiques. Elliott said that Elders sponsors other sports teams, but does not own them outright. The future, then, may

0 see Carling executives g drinking another cele| bratory draft—honorz ing new owners for two

1 of Canada’s major pro|fessional sports “ franchises.

-THERESA TEDESCO with ANN WALMSLEY in Toronto

ANN WALMSLEY