Sleeman expects Sapporo to grow company he founded

John Sleeman is tendering every share he owns in the company he founded because he believes Japan's Sapporo Breweries Ltd. will take the company toits next level of growth as Canada's premium brewer.

"This is a good news story," he told analysts in a conference call Monday. "This story is about growth and quality and jobs. It is not about cutting costs and looking for synergies.

"People working here should be able to go home with a lot fewer worries about their jobs."

Investors also appeared pleased with the deal. Sleeman shares rose by 17 per cent or $2.54 to $17.37 on the Toronto Stock Exchange Monday. The 52-week high is $17.44, posted in the past few days.

Sleeman, who is also chairman and chief executive officer of the Guelph, Ont.-based brewery, was commenting on the announcement late Friday that he has agreed to tender all the shares he owns to Japan's Sapporo for$17.50 a share.

The all-cash deal to sell Sleeman Breweries Ltd. to Sapporo is worth$400 million in total, including assumption of debt. Thatwas "the highest and the best" offer that the company received in the five months since Sleeman announced he was considering putting his company up for sale.

Sleeman has sold shares in the company over the years, leaving him with a 4.4 per cent stake in the firm. Jarislowsky, Fraser Ltd. has an 18 per cent stake, while Letko, Brosseau & Associates Inc. has 10 per cent.

The deal is subject to regulatory approvals and a two-thirds vote by company shareholders, but is expected to go through by October.

About 30 companies expressed an interest in buying the 18-year-old Sleeman. The names were not disclosed, but they are believed to include Molson Coors Brewing Co., Labatt Brewing Co. Ltd. and Royal Grolsch NV of the Netherlands.

Business as usual

Sleeman said his employees can relax, but that is not necessarily true for the founder.

"I expect to be here for quite some time," he told the conference call. But he has no guarantees beyond the next 30 to 45 days, the length of time it will take to close the deal.

In the meantime, he joked: "Sapporo may get tired of me before I get tired of them. I haven't worked anywhere else since I was 19, and I'm not very good at taking orders."

He said he was very happy with the Sapporo deal because that firm wants to buy a growing concern that includes the company plants, staff and executive team.

While there are no guarantees, Sleeman said he understands Sapporowants to continue business as usual, includingproduction ofpremium-quality beers, as well as the so-called value brands. The companybrews thosebeersto keep its nationwide chain of plants running at full capacity.

Sleeman produces the Sleeman, Upper Canada and Unibroue brands, as well regional products in British Columbia and Nova Scotia. It produces Stroh beer for the Canadian market and distributes Sapporo and Grolsch in Canada.

But Sapporo's focus is clearly on the premium brands.

Reputation for quality

Sapporo has a reputation, Sleeman said, for quality, marketing, efficiency and ethics. It is also a $5-billion company that has the financial resources to invest in Sleeman and take it to the next stage of its growth, with more beer, in more markets, in the United States and possibly Japan.

Sleeman has survived the intense competitive pressure of the Canadian market in recent years, as Canada's two majors sold out to larger international brewers and many local companies moved to the discount buck-a-bottle format.

Sleeman said he could have survived that competition as a going concern, but "Sapporo gives us the financial and technical resources to continue to grow. It was prudent to find a larger partner who can help us continue our growth."

But Sleeman insisted that he did not have to sell out to survive.

"We would have survived," he said. "We started with a lot less than we have now. We would find a way to be profitable."