(29 May 2009)

Cobra Beer has become the latest victim of the "credit crunch" after Zelf Hussain, David Chubb and Colin Haig of PricewaterhouseCoopers LLP were appointed as joint administrators of the company on 29 May 2009. Following their appointment, the administrators were pleased to announce the sale of the business to a joint venture formed by Molson Coors (UK) and some of the existing shareholders of Cobra Beer. Molson Coors (UK) are reported to have paid £14m for a 50.1% share in the new venture.

Cobra Beer, which was established in 1989 by Lord Karan Bilimoria, is one of the UK’s fastest growing premium beer brands and is exported to over 50 countries around the world. Despite sales of £177 million in year 2007, the company has never made a profit. Pursuing an aggresive growth strategy in the UK, India and abroad, the company rapidly ran out of cash as a result of the economic downturn. The new joint venture will see secured creditors like ICICI bank - who are collectively owed about £20m - paid back in full, but it leaves unsecured creditors like early investors and suppliers £75m out of pocket.

"We had no choice but to go down this route", Bilimoria told The Sunday Times newspaper (31/05/209) "I feel terrible about that. I feel gutted that the unsecured creditors aren't going to be paid back".

Many industry insiders feel tha Molson Coors have snatched a bargain. Only a few years ago, Cobra Beer had a valuation of between £80 - £100 million. Molson Coors (UK) has over 2000 employees in the UK and breweries in Burton on Trent, Alton and Tadcaster. Their current portfolio of beers includes Carling, Coors Light, Grolsch, Worthington’s, Caffrey’s and Sol.

Zelf Hussain, joint administrator and director at PricewaterhouseCoopers LLP said: “We are extremely pleased to announce the sale of Cobra Beer to a joint venture formed by Molson Coors (UK) and Cobra Beer. We have just completed an long and intensive period of activity as we worked with Cobra Beer to explore the options available to them."

Following a round of cost-cutting that saw four of Cobra Beer's directors exit and staff numbers cut from 150 to 50, there were hopes of a potential restructure. However, an eleventh hour veto by a major creditor broke down talks of a company voluntary arrangement (CVA) and left the administrators with no other option except to sell the business. "“We feel that this deal represents the best outcome for the business, secures the rights of the employees and will ensure the Cobra brand continues to exist.”