BALA CYNWYD, Pa., April 24 /PRNewswire-FirstCall/ -- Central European Distribution Corporation (Nasdaq: CEDC) today announced that it has signed binding agreements with Lion Capital LLP ('Lion') and certain of Lion's affiliates to increase CEDC's ownership in the Russian Alcohol Group ('Russian Alcohol'), the leading vodka producer in Russia, including an agreement regarding the acquisition by CEDC of the controlling stake in Russian Alcohol. This new agreement replaces the prior agreement entered into between CEDC and Lion Capital on July 9, 2008.
In connection with the multi-stage equity purchase, CEDC will acquire over the next five years (including 2009) all of the equity interests in Russian Alcohol held by affiliates of Lion. In the initial stage during 2009, CEDC has agreed to pay to affiliates of Lion for certain equity interests consideration consisting of a cash payment of $17.75 million, $17.15 million in shares of CEDC common stock and an additional one million shares of CEDC common stock in October 2009. In addition, CEDC will convert its $110 million subordinated exchangeable loan notes into additional equity interest in the Russian Alcohol Group at closing. With the above mentioned consideration in 2009, CEDC will have increased its equity ownership in Russian Alcohol from 42% to approximately 54%.
Our agreements governing the purchase also provides for CEDC's acquisition of the remaining equity interests in Russian Alcohol from affiliates of Lion over the course of the next four years, starting in 2010. In connection with this acquisition in 2010, CEDC is obligated to make a cash payment of approximately $55.0 million payable on June 30, 2010 and to issue 1.575 million shares of CEDC common stock. In 2011, 2012 and 2013 the annual cash consideration to be paid is approximately $150.0 million in each year. CEDC may satisfy up to $35 million of the above payments (2011 to 2013) through the issuance of shares of CEDC common stock. In 2012 as well as the cash payment, CEDC will issue an additional 751,852 shares of CEDC common stock to affiliates of Lion. Finally, CEDC will issue to certain affiliates of Lion warrants over 1,490,550 shares of CEDC common stock exercisable on May 31, 2011 at a strike price of $22.11, 300,000 shares of CEDC common stock exercisable on July 31, 2012 at a strike price of $26, and 1,803,813 shares of CEDC common stock exercisable on May 31, 2013 at a strike price of $26. The gain on the warrants can be settled in cash or on a net share basis at CEDC's sole election. This total consideration described above factors in the effective cost of capital of spreading the payments over five years. The above cash consideration amounts are based on current exchange rates.
Pursuant to the new agreements, CEDC initially will receive significantly enhanced minority rights, and when it has paid consideration in aggregate of $230 million to Lion and its affiliates, CEDC and Lion will jointly govern Russian Alcohol as a 50-50 joint venture. Once CEDC has paid consideration in aggregate of $380 million to Lion and its affiliates, CEDC will gain sole management control of Russian Alcohol, and Lion will be granted certain minority rights. CEDC has the right to accelerate this process by accelerating the payments it is required to make. CEDC has granted Lion security rights over the equity of Russian Alcohol Group, against default by CEDC or a change of control of CEDC.
Certain aspects of the agreements, including CEDC's acquisition of joint control and sole management control of Russian Alcohol, are subject to the receipt of certain antimonopoly approvals. Depending on market and other conditions, CEDC currently intends to finance the purchase through a combination of cash, debt and equity financing.
CEDC also announced that they will host a conference call scheduled for Monday, April 27, 2009 at 8:00 am, Eastern Time to discuss this transaction in further detail. The conference call will also be broadcast live over the internet.
To listen to the call live, you must go to the following webcast at least fifteen minutes early in order to register. You can then download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay of the discussion will be available shortly after the call on our website at www.cedc.com.
To listen to the conference call, please dial-in:
Toll Free: 877-879-6203
International Calls: 719-325-4804
Passcode: 8261434
Webcast:
http://www.videonewswire.com/event.asp?id=58308
Russian Alcohol is the largest vodka producer in Russia with approximately a 15% market share, and produces leading vodka brands such as Green Mark, which is the number one vodka brand in Russia and second largest in the world, and Zhuravli, a top selling premium vodka brand behind CEDC's Parliament, which is the top selling premium vodka brand in Russia. Russian Alcohol is expected to have 2009 Net Sales of approximately $475-$500 million based upon current exchange rates.
Lion Capital is a London-based investment firm that is recognized as a leader in investing in the consumer sector, with over euro 4 billion of equity capital invested in consumer businesses across Europe and North America.
