Orkla to sell its stake in Carlsberg Breweries for NOK 17.5 billion

Orkla is selling its 40 per cent interest in Carlsberg Breweries to Carlsberg AS (CAS) for NOK 17.5 billion. CAS will also take over Orkla's share of the company's liabilities, bringing total enterprise value of Orkla's interest up to NOK 22.5 billion.

The agreement implies that Orkla will receive DKK 11 billion in cash and a debt certificate for DKK 3.8 billion from a first class bank which falls due in two years' time and runs at a market interest rate. Orkla will also receive a dividend of DKK 120 million from CB for 2003 and a sum to cover all transaction costs. The total proceeds from the CB shares will therefore be nearly DKK 15 billion (NOK 17.5 billion).
 
In addition to the proceeds, CAS will take over Orkla's share of CB's liabilities, which amounts to approximately DKK 4.5 billion. The enterprise value of Orkla's interest in CB will therefore be just over DKK 19 billion, or approximately NOK 22.5 billion. The sale will result in a book gain of NOK 12.5 billion. The effect of the sale on Orkla's accounts and relevant key figures for evaluating the sale price are shown in the enclosed appendices.
 
Implementation of the sale is conditional upon the approval of Orkla's Corporate Assembly, which will discuss the matter at its meeting on 3 March. Provided that the Corporate Assembly approves, settlement will take place at the beginning of March.
 
When CB was established in 2000, Orkla's intention was to develop the values in CB in a long-term industrial perspective, with emphasis on profitable growth, efficient operations and commercial focus. This was to take place within a framework of good partnership between CAS and Orkla, where Orkla would contribute its industrial experience and brand expertise. This was also CAS's attitude, and the basis for the agreement concerning the growth and development of CB that was entered into between Orkla and CAS when CB was established in 2000.
 
In Orkla's view, cooperation between CAS and Orkla has been satisfactory until recently. However, in summer 2003 there was a change in the attitude of the Carlsberg Foundation and CAS towards the partnership that had been established. The Carlsberg Foundation, which is the controlling shareholder in CAS, has increasingly expressed ambitions and attitudes which, in Orkla's view, would not promote value creation in CB and would weaken important intentions inherent in the cooperation agreement signed in 2000. The parties have therefore held increasingly differing views concerning the future development of CB. The natural solution for Orkla would have been to buy CAS out of CB. This was impossible for several reasons. Orkla has therefore negotiated an agreement to sell its shares in CB to CAS for a good price, and believes that this will best serve the interests of the Orkla Group and its shareholders.
 
Orkla's shares in CB are owned by the Swedish company Orkla AB and the transaction will therefore be subject to Swedish tax regulations. According to the current Swedish tax regulations concerning the sale of shares in commercial enterprises, the payment received by Orkla AB will be tax-free.
 
Group President and CEO Finn Jebsen comments:
"Orkla would have preferred to further develop its industrial position in Carlsberg Breweries. However, the changed attitude of the Carlsberg Foundation and the increasing distance between the parties has lead us to the conclusion that a sale at a good price is preferable. The Orkla Group has a solid foundation from which to pursue a long-term, profitable industrial growth on its own account, and the sale of the CB shares provides Orkla with substantial financial resources to realise such growth."
 
The employee-elected members of Orkla's Board of Directors are of the opinion that a sale of CB shares is wrong for Orkla from an industrial point of view, and they have therefore been unable to support the resolution to sell the shares.
 
After the sale, Orkla will be in a very strong financial position. Taking this into account, and also taking into account the fact that Orkla is celebrating its 350th anniversary in 2004, the Board of Directors will recommend to the General Meeting on 29 April that an extraordinary dividend of NOK 25 per share be paid out (a total of more than NOK 5.1 billion) in addition to the proposed ordinary dividend of NOK 4.00 per share. The remainder of the proceeds from the sale of CB shares will be retained in the company as a basis for further industrial growth.  
 
Appendix