2/19/2004 12:00 

Carlsberg A/S ("Carlsberg") has signed an agreement to buy Orkla ASA's 40% shareholding in Carlsberg Breweries A/S ("Carlsberg Breweries") for a total of approximately DKK 14.8bn (the "Transaction"). On completion of the Transaction, the partnership between Carlsberg and Orkla ASA ("Orkla") will end and Carlsberg will be the sole shareholder of Carlsberg Breweries. Completion of the Transaction is anticipated to occur no later than mid March 2004.

The Transaction is the largest single investment undertaken by Carlsberg to date and Carlsberg believes it will create significant shareholder value and improve the structure of the Carlsberg Group. The Transaction will:

  • ensure that shareholders of Carlsberg have complete ownership over their largest operational asset – Carlsberg Breweries;

  • provide shareholders with a more direct access to operational cash flows;

  • be immediately earnings enhancing (prior to the amortisation of goodwill);

  • enhance transparency and corporate governance for all Carlsberg shareholders across the Carlsberg Group; and

  • best position Carlsberg Breweries to further its earnings and volume growth with a single shareholder, focussed upon the brewing industry.

Nils S. Andersen, who becomes chief executive of Carlsberg A/S, said: "Our financial aim is the continued change of Carlsberg into an internationally competitive company producing value for its shareholders. This is a hugely important step in a process which began three years ago and has a number of years yet to run."

"In terms of competitiveness, we are doing well. Carlsberg is now the fastest growing international brand in the world (with Tuborg not far behind). And we have built leading positions in all of our chosen markets in Northern and Eastern Europe and, through BBH, Russia. Plans for the wider developing markets in the Far East are progressing."

"But structurally and financially, Carlsberg needs to deliver two things for its shareholders – operational transparency and better optimisation of assets and cash flows. That is what this transaction is about."
"We are paying a 7.9 EV/EBITDA multiple for Orkla's stake, which compares favourably to recent transactions in the sector. This deal is the logical step following the merger of the brewing interests of Carlsberg A/S and Orkla in 2000, allowing shareholders of Carlsberg to take full ownership over the merged entity Carlsberg Breweries."

"Our priority now will be to increase cash generation and de-leverage the business. We will seek to accomplish this through further cost efficiencies and focusing on greater cash returns from all of our operations. We have a motivated group of managers who we believe are determined to achieve the goals we have set. This is a critical step in our long term strategy of securing ownership over key assets and cash flows."  

Background to the Transaction

Carlsberg and Orkla agreed to combine their brewing activities in May 2000. In February 2001, Carlsberg Breweries was established to manage these operations, with Carlsberg owning 60% of the company's equity and Orkla holding the remaining 40% in a share merger effected without any significant premium being paid.

Carlsberg Breweries was established to achieve the critical mass necessary to make better use of its market positions and to realise synergies within production, sourcing, logistics and marketing. This was particularly important in the Russian, Swedish, Norwegian and Baltic markets, where the contribution of Orkla's brewing activities helped to ensure that Carlsberg Breweries became the market leader.

Many of the original intentions of Carlsberg in forming Carlsberg Breweries have now been achieved. The profitability of the current business has increased considerably, many of the expected synergies have been realised and Carlsberg Breweries has achieved its desired position in several markets. In addition during this period Carlsberg has divested a number of non-strategic companies and assets, such that today the Group is a focussed, global brewing company.

Carlsberg believes that the future opportunities within Carlsberg Breweries will best be achieved by a single shareholder focussed upon the brewing industry.

Financial terms

The total purchase price for Orkla's 40% shareholding in Carlsberg Breweries is approximately DKK 14.8bn.

At completion, the Carlsberg Group will make a cash payment to Orkla of DKK 11.0bn, together with an additional payment of DKK 80 million to cover Orkla's expenses associated with the Transaction.

In addition, Carlsberg will pay DKK 3.8bn plus accrued interest two years from completion. At Carlsberg's current cost of financing, this deferred payment is estimated to have a present value of approximately DKK 3.7bn.

Based on the total purchase price of DKK 14.8bn, Carlsberg will pay a gross EV/2003 EBITDA multiple of 7.9x. After deduction of minority interests, the corresponding 2003 net EV/EBITDA multiple paid is 8.6x.

Orkla will be entitled to receive its share of the ordinary dividend from Carlsberg Breweries for the year ended December 2003. Orkla's share of this dividend amounts to DKK 120 million.

The Transaction will result in goodwill/trade marks of approximately DKK 10.1bn. In accordance with present accounting principles the goodwill will be amortised over a 20-year period and result in a charge during the year ending December 2004 of approximately DKK 420m. Following the expected transition to IFRS/IAS accounting standards in 2005, amortisation of goodwill is no longer expected to be permitted and the results for 2004 will be adjusted accordingly for comparison.

Financial consequences of the Transaction

The Transaction will immediately be earnings enhancing before goodwill amortisation. Following completion of the Transaction and the previously announced acquisition and associ-ated on-sale of Holsten assets, consolidated net debt of the Carlsberg Group is estimated to DKK 27bn, compared to DKK 9bn year-end 2003. This figure is expected to be approximately DKK 22bn year-end 2004.

The Transaction will initially be financed through existing cash reserves and a EUR 2.45bn senior unsecured credit facility. The credit facility will cover the payment of the Transaction consideration to Orkla as well as near term refinancing and working capital needs. The Group will refinance parts of the credit facility through a capital increase, real estate disposals and local market bond issuance by Carlsberg.
To strengthen the financial position of the Group and to improve the liquidity of the Carlsberg shares, Carlsberg intends to make a DKK 3-3.5bn capital increase by way of a rights issue. The Carlsberg Foundation has agreed to invest DKK 1bn of net new equity in supporting the planned rights issue. In addition, as part of the rights issue, the Carlsberg Foundation has agreed to reduce its ownership in Carlsberg to 51%. All shareholders in Carlsberg will be offered the right to participate in the rights issue, although to improve the liquidity of Carlsberg's shares, only B-shares will be issued.

Approval to increase the authorised share capital of Carlsberg will be sought at the Annual General Meeting of the company on 18 March. If approved, all outstanding treasury stock in Carlsberg is expected to be cancelled.

Carlsberg is committed to maintaining a financial profile consistent with investment grade credit quality. In addition to the capital increase and asset disposals, management will work towards the swift de-leveraging of the Carlsberg Group through further improvements in the conversion of operational cash flow, which in 2003 totalled DKK 4.5bn. Consistent with previous statements Carlsberg's management will seek an appropriate public credit rating as soon as practicable.

In pursuing this Transaction, and furthering its strategic aims with regard to the future devel-opment of the company, Carlsberg has the full support of its majority shareholder, the Carlsberg Foundation. Carlsberg is aware that the Carlsberg Foundation will issue a press statement today supporting this positive development in taking full ownership over Carlsberg's main operational asset.

Other consequences of the Transaction

Until end of 2006 Orkla will be entitled to receive a pro rata share of a potential gain, should Carlsberg decide to sell all or parts of either Carlsberg Breweries or BBH. Carlsberg have no such plans.


Completion is only subject to approval by the corporate assembly ("bedriftsforsamlingen") of Orkla. 

Changes in management

The Executive Board of Carlsberg will comprise Nils S. Andersen (Chief Executive Officer), Jørn P. Jensen (Executive Vice President and Chief Financial Officer) and Paul Bergqvist (Executive Vice President).

On completion of the transaction the three non-executive directors of Carlsberg Breweries nominated by Orkla will resign with immediate effect and the management changes will be effective.

Forward-looking statements

The forward-looking statements contained herein, including forecasts of sales and earnings performance, inherently involve risks and uncertainties and could be materially affected by factors such as global economic matters, including interest rate and currency developments, raw material developments, production and distribution related problems, breach or unexpected termination of contracts, price reductions, market acceptance of new products, launches of rival products and other, unforeseen, factors.

Carlsberg will only update and adjust the specifically stated expectations in as far as this is required by legislation.

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Carlsberg has been advised by Lehman Brothers.  The credit facility is provided by a consortium of banks consisting of ABN AMRO, Danske Bank and JPMorgan, with Danske Bank as Agent. JPMorgan has acted as Carlsberg's Financial Advisor.

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This announcement does not constitute, or form part of, an offer or any solicitation of an of-fer, for securities.

This announcement does not constitute an offer or invitation to subscribe for or purchase any securities for sale in the United States. Securities in respect of the proposed capital increase may not be offered or sold in the United States absent registration or an exemption from registration. The securities in respect of the proposed capital increase have not been and will not be registered under the Securities Act of 1933 or under the securities laws of any state of the United States. Carlsberg does not intend to make a public offering of securities in the United States.

This announcement must not be mailed, or otherwise forwarded, distributed or sent in, into or from the United States, and persons receiving this announcement (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in, into or from the United States.

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This announcement is available in Danish and English. In case of doubt the Danish version shall prevail.

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Apress/analyst conferencewill be held today on 19 February 2004 at9:00 am (8.00 am GMT)at Malterisalen, Ny Carlsberg Vej 100, DK-1760 Copenhagen V.

Apress/analystconference forinternational analysts and investorswill be held today on 19 February 2004 at Merchant Taylors Hall, 30 Threadneedle Street, London at3:00 pm GMT (4:00 pm Danish time).

Apresentationis available onwww.carlsberg.com/infofrom9:00 am (8:00 am GMT).

The meetings will cover this transaction and the annual results for 2003.



For further information :

Nils S. Andersen  +45 33 27 33 27
Jørn P. Jensen  +45 33 27 27 27

Mikael Bo Larsen, +45 33 27 1223

Margrethe Skov, +45 33 27 1410

London Media:
M: Communications  +44 207 153 1530