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Budvar Faces Privatisation

Added: Sunday, April 1st 2007

Budweiser Budvar, the state owned Czech brewery that has been embroiled in a century-long trademark dispute with American giant Anheuser-Busch, faces privatisation by the government. In April, agricultural minister Petr Gandalovic announced the brewery would be turned into a joint stock corporation within a year as the first step to being sold off.

The government will continue to own and run the brewery but will announce an intention to make shares available for purchase on the stock market at some time in the future. But the status of a joint stock company will enable the government to raise money, which it needs urgently to fund such public works as a road-building programme.

The current centre-right government in Prague has also said it will hold "a thorough inspection" of Budvar, which is based in the south Bohemian town of Ceske Budejovice - Budweis in German. The seriousness of the inspection can be measured by the fact that will be carried out by Mr Gandalovic along with prime minister Mirek Topolanek.

They are suspicious that a deal struck with Anheuser-Busch last year to market Budvar in the United States has been to the disadvantage of the Czech brewery. Anheuser-Busch brews the other Budweiser beer, the worlds biggest brand. The two companies have been locked in endless disputes since the turn of the 20th century over ownership of the trademark dispute.

The dispute is so bitter that the beer world was stunned when the two breweries struck a deal that will enable A-B to market Budvar in the U.S. under the neutral name of Czechvar. Both companies said the deal would have no bearing on the continuing trademark dispute and the Czech brewery has since lost an appeal in Italy, where it cannot use the Budweiser trademark.

A Czech government spokesman said the deal with A-B in the U.S. diminishes Budvar's value. The government is concerned that the decision to use the name Czechvar in North America could damage the value of the Budweiser trademark, put at one billion U.S. dollars.

Budvar's chief executive Jiri Bocek was bullish about both the deal with Anheuser-Busch and the recent performance of his brewery. He said the company had increased production in 2006 by 5% to 1.15 million hectolitres, with almost half that production going as exports to more than 50 countries.

Budvar's position could be strengthened if the shaky centre-right coalition in Prague falls and elections create a new centre-left regime that will keep the brewery in state hands and postpone privatisation. Both left and right agree that privatisation cannot go ahead until the trademark dispute with A-B is solved, as no major western brewing group would be interested in buying Budvar if it was still at loggerheads with the American company.