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Lion consortium buys largest Russian vodka company

The European buyout firm has partnered with Goldman Sachs and a rival vodka producer to buy Russian Alcohol Group, which has reached $500m of sales in just four years.

Lion Capital has bought Russian Alcohol Group, the largest producer of vodka and pre-mixed alcoholic drinks in Russia, alongside Goldman Sachs and Central European Distribution Corporation, a Polish and Russian vodka producer. Lion Capital declined to disclose had much it had paid for its majority stake.

Green Mark: Lion's
second Russian deal

The Central European Distribution Corporation has made an equity investment of $156.5 million (€99.6 million) for an approximate 40 percent stake in the business. It has also acquired exchangeable notes worth $103.5 million which bear interest from 8.3 percent to 10.5 percent. These can be exchanged into additional shares in 2010.

Russian Alcohol was created by Industrial Investors, a Russian private equity firm, in 2003. Its Zelenaya Marka (Green Mark) vodka brand is the largest selling in Russia and one of the fifth most popular globally, according to a statement.

The company also sells Zhuravli, another vodka brand, which is one of the fastest-growing in the country and it also has one of the largest portfolios of pre-mixed drinks in Russia. 

It is based in Moscow and employs around 3,500 employees across five production facilities.  In the current financial year, the company expects to have sales of more than $500 million.
Lion Capital was advised by Goldman Sachs, as well as Weil, Gotshal & Manges, a law firm, and PricewaterhouseCoopers, a big four accountant.

Lion Capital has reason to toast previous investments in the drinks industry. The European arm of Hick Muse Tate & Furst, which became Lion Capital, bought Perrier Jouet, the producer of Mumm, a champagne brand, for $399 million in 1999 nearly doubling the size of its investment.  The firm then sold Perrier Jouet to Allied Domecq, a trade buyer, for €575 million ($903 million) in 2001.

The firm sealed its first investment in Russia last year, buying Nidan Soki, a soft drinks company, for an undisclosed sum. It was believed to be at the time the largest private equity investment in Russia at around $700 million.