Pabst CEO Bitting says IPO could allow further acquisitions

Modern Brewery Age, July 19, 1999

Pabst Brewing Company CEO Bill Bitting continues his turn in the industry limelight, now suggesting that a public stock offering could be in the cards for the country's number four brewer. He states that this move would help finance further acquisitions in the brewing industry.

Bitting said that possible acquisition targets might include Minnesota Brewing Co., Genesee Brewing Co., and the Pittsburgh Brewing Co.

According to press reports, Pabst's holding company, the privately-held S&P Co., must eventually sell off some ownership in Pabst to comply with federal tax laws. S&P Co. is owned by the estate of the late Paul Kalmanovitz, who died in 1987, leaving his assets to be divided among several universities and medical institutions. The estate was to go in trust when Mrs. Kalmanovitz died in 1994, but other relatives made legal challenges to the estate.

Bitting recently told the San Francisco Business Times that he expects these legal matters to be resolved by the end of 1999, at which point the company must be liquidated into passive investments within five years. Mrs. Kalmanovitz' will requires that S&P contribute 5% of its profits to charity, starting this year.

"My job is to maximize the value of the estate for charity," Bitting told the Business Times, "and we are nowhere near through - five years is a heartbeat."

Bitting reports that Pabst sales were about $450 million last year, and he is projecting sales of up to $1.3 billion this year. The company has closed or sold most of its breweries in recent years, but still operates the Pearl brewery in San Antonio, TX and now owns a former Stroh Brewing Co. brewery in the Lehigh Valley of Pennsylvania.

The company contracts most of its volume, including the Stroh volume it has acquired, at Miller Brewing Company breweries.

Bitting's deal for Stroh was one of the most dramatic developments in the brewing industry in recent years.

In the Stroh deal, Bitting convinced Lehman Brothers and a banking consortium to take substantial leverage on the acquisition. Stroh accepted a five-year note for $45 million, allowing S&P to put only $20 million of equity in the deal. 'We also bellied up a nice stable of brands to Miller to get what we wanted," Bitting said.

According to statements to the press, Bitting is now seeking to assemble as large a company as possible, and take it public or find a buyer before the liquidation deadline. "These regional brands have a lot of value left in them," Bitting told the San Antonio Express-News. He likened the regional marketing efforts Pabst must undertake as "a little like guerrilla warfare."

Bitting reported that Pabst's low margins in the popular segment are partly balanced by S&P's malt liquor brands, which have higher margins.