21 April 2008 - Synergy, Co. today confirmed that it has completed the acquisition of the Myagkov vodka brand, one of the leading brands in the fast growing sub-premium price segment in Russia and Ukraine.
The Myagkov brand will add 2.2 million decalitres or 2.4 million 9L cases (2007 volumes) to Synergy’s current portfolio. The acquisition substantially increases Synergy’s Russian market share and distribution capabilities. It also underscores the company’s position as the preeminent market consolidator. This new M&A transaction is expected to be accretive in a number of ways, including profitability and shareholder value.
Following closing this transaction, Synergy’s market share has increased up to 7.9% (based on 2007 Rosstat data, pro-forma for the transaction) from 2.3% two years ago, making Synergy, Co. also the fastest growing Russian distilled spirits producer. Once again, the company confirms its role as the leading consolidator in the vast Russian vodka market.
The combination of Synergy’s current sub-premium brand Russian Ice with Myagkov will create a market leader in Russia’s sub-premium segment where overall gross profit estimates exceed that of any other price segments.
Besides the addition of a leading brand to its broad portfolio, the acquisition provides Synergy a significant entry into Ukraine, the # 3 global vodka market after Russia and USA in terms of volume. The acquisitions will generate substantial savings on distribution and selling expenses through the addition of the Myagkov 200 persons sales force, which is particularly strong in Moscow, and the Central and Volga Federal districts.
The acquired brand will be fully incorporated into Synergy’s existing national production and distribution platform.
“We are confident that this deal will create significant value for Synergy’s shareholders,” said Alexander Mechetin, CEO of Synergy. "After the acquisition of the Myagkov brand, the brand’s production will transition to Synergy’s Russian production platform rather than be imported from Ukraine, resulting in significant logistics saving. In addition, tangible synergies will result from combining the sales forces.”
Alexander Mechetin continued, "This transaction offered a unique opportunity for Synergy. The valuation multiples of the deal are attractive when benchmarked against Synergy’s current trading ones and, more so, when compared to recent industry transactions, in Russia, the CIS and globally. Furthermore, I would like to stress that Synergy purchased a high quality brand and not a distillery or other fixed assets. This allows us to use existing capacities in our current platform and, at the same time, to rationalize the Myagkov cost base.
“In a broader context”, Mr. Mechetin concluded by stating , “recent global M&A activity in the vodka sector such as the privatization of Vin&Sprit (Absolut) by Pernod Ricard and the Ketel One deal announced by Diageo reinforces the attractiveness of the category and we feel that, through our history on both acquisition and organic growth, we are on track to become the #1 player in the largest vodka market in the world."
Renaissance Capital acted as sole financial advisor to Synergy, Latham&Watkins acted as Synergy’s legal adviser and Lovells CIS acted as a consultant on intellectual property issues.