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Another Win for Private Equity and a Loss for America

Posted by on September 19, 2014

pabstRumor today that a deal will be announced Monday, September 22, that Russian brewer Oasis Beverages will pick up Pabst Brewing for USD $750 mil.  In addition to Pabst, the company contracts and distributes Schlitz , Colt 45, Old Miwaukee, and a couple dozen other brands.

Private equity group TSG, who likes picking up “orphan brands” will take a minority position.

The company is being purchased from C. Dean Metropoulos & Co., who picked the company up in 2010 for $250 mil. Assuming an even four year old, that’s $500 mil profit, or $342, 465  each day they owned it.  Not counting, of course, whatever they took out of it along the way, or fees they charged outside investors.

No word on who gets the substantial real estate holdings.

Why does this bother me?  I’m not a xenophobe.  I fully embrace the global marketplace –  I spent a great deal of my career overseas.  I have a problem with private equity in general, for reasons I’ve already written about.   I’m gonna have a bigger problem with the industry if they start selling off iconic American brands and companies to foreign owners.

Like Smithfield Foods selling out to  the Chinese company Shuanghui,  this just doesn’t sit well with me.  Since Pabst is privately held, we don’t know what the multiples are on this deal, details will probably be released in the near future.

But undoubtedly, the company is overpriced, as that’s what private equity is all about these days.

Investing other people’s money to pay too high a price for a company in hopes that they will sell it for more.  It seems to be a formula that’s working, but it’s not going to end up that great for America.

 

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