Czech brewer Pivovary Lobkowicz Group AS is planning Prague’s first initial public offering since 2011 to tap investors’ hunger for new stocks and expand in the nation with the world’s heartiest beer drinkers.
Lobkowicz wants to raise as much as 1 billion koruna ($50 million) by selling about 40 percent of its shares in the second quarter after potential investors showed “great” interest, Chief Executive Officer Zdenek Radil said in a Jan. 23 interview at Bloomberg’s Prague newsroom. The company wants to join the country’s benchmark PX (PX) equity index, he said.
The offering would mitigate a five-year plunge in turnover at the Prague Stock Exchange as the Czech economy recovers from its longest recession on record. The number of equities on the bourse has dropped to 26 from 65 a decade ago, and three of the 10 most-traded stocks are cross-listings of companies based in other markets, according to data on the bourse’s website.
“There’s a shortage of actively traded stocks in the Czech Republic and no IPOs, creating surplus liquidity that wants to be invested,” Radil said. “All institutional investors we’ve met have told us it’s great we’re doing this in Prague because they have a lot of clients who want to buy a new Czech stock.”
Trading in Prague is dominated by shares of banks and energy companies, with no brewer currently listed. The bourse cross-listed Stock Spirits Group Plc (STCK) three months ago after the Czech liquor producer held an IPO in London. Its shares rose 1.5 percent to 95.55 koruna today in Prague.
“We are convinced that the Lobkowicz offering will incite demand from investors, given that it comes from a new sector that is currently not represented in the market,” bourse spokesman Jiri Kovarik said in an e-mail on Jan. 24.
Pivovary Lobkowicz owns seven local breweries with an annual output of 905,000 hectoliters in 2012, the last year compiled. It sells its beers mostly in the Czech Republic.
The company posted an Ebitda, or earnings before interests, taxes, depreciation and amortization, of 177 million koruna that year, up 48 percent from a year ago, as “higher margin” products like specialty beers boosted profitability.
“There’s a huge potential to win more establishments as clients for our cask lagers and speciality beers as we register a lot of demand for it,” said Radil. “The listing should also help to promote our brands and win loyal customers that can participate with us.”
The brewer expects its 2013 Ebitda to exceed 200 million koruna, under Czech reporting standards. Lobkowicz expects to prepare an IFRS prospectus for investors and start the IPO by the end of June, Radil said.
Indicative interest from institutional investors in the Czech Republic has been “great” so far and the company will consider a dual listing in Warsaw with Prague being the main market, Radil said.
Lobkowicz is controlled by entrepreneur Martin Burda, who has a 55 percent stake, and other three shareholders, Radil said. Burda, who will capitalize his loans for shares, will still have a controlling stake, while the free-float should be around 40 percent, Radil said.
The Czech brewers are trying to turn around declining consumption of traditional lagers by offering new products such as ales, stouts and porters.
Total beer production for the Czech Republic rose 1.4 percent in 2012, after years of consecutive declines, only because of higher demand for fruit-beer mixes, according to the data of the Czech Malt and Beer Association.
The Czech market is dominated by brands owned by SABMiller’s Plzensky Prazdroj AS, Moolson Coor’s Pivovary Staropramen AS and Heineken CR. Pivovary Lobkowicz is among the three largest Czech-owned breweries, together with Budejovicky Budvar and Pivovary Moravskoslezske.
The recent change of Czech beer drinking habits has also spurred the spread of small-sized craft breweries, or pub brewers, whose numbers jumped from virtually zero to about 200 over the past few years. Their total output represents only about 1 percent of the annual beer production in the country, industry experts say.