PABST: "FULLY INDEPENDENT AND AMERICAN-OWNED"

Special to the Readers of Milwaukeeworld.com

By Michael Horne

The folks at Pabst Brewing Company, who usually don't have much to say about anything, have issued a statement on the Budweiser-InBev merger:

"In response to the many inquires we have received regarding the acquisition of Anheuser Busch by InBev:
"No doubt, the AB-InBev combination will create a formidable competitor. And it is true, Pabst Brewing Company will be the last of the famous iconic U.S. brewers to be fully independent and American-owned. ... However, this combination will have no impact on our mission to create and brew the best beers in the industry."

The unexpected Pabst statement drew immediate derision in a Beer Advocate forum, where beer aficionados noted that it is highly unlikely that Pabst received "many inquiries" -- or any at all regarding the Anheuser Busch acquisition. Also, many readers pointed out that Pabst does not operate any breweries, but contracts its production to Miller, not that there's anything wrong with that. Miller produced 6.6 million barrels of Pabst-owned products last year.

And what about the statement, "fully independent and American-owned?"

Some readers thought Pabst and its brands were owned by Miller.(In 1999 Miller bought the Olde English 800 Malt Liquor and Hamm's brands from Pabst. But Pabst retained some 25 other brands, including its flagship beer and Schlitz.) One alert reader directed people to my 2006 post here at Milwaukeeworld entitled "Who Really Owns Pabst? (An Uncharitable Foundation.)" An update is in order.

Pabst is still owned by the Kalmanovitz Charitable Trust, which received the assets of S&P Holding Company in July, 2000 at the death of Lydia Kalmanovitz. Although the Kalmanovitz estate was in excess of $300 million, the trustees set the value of S&P at a fair market value of $2,000,000, according to the trust's IRS Form 990PF for 2001. The reason for the absurdly low valuation, according to the trust, was that "the company has lost money in recent years, is heavily indebted and is in the process of debt restructuring."

Another, more probable reason for the valuation is that foundations must give away 5 per cent of their assets each year, and Kalmanovitz only gave away $108,000 in that year. By 2003, the fair market value of Pabst was pegged at $10,000,000, and it still donated just the $108,000 in the form of $36,000 checks to three institutions affiliated with the trust's three board members at the time.

The 2004 tax return shows a fair market value of $55,573,000 at year end, and the trust distributed $700,000 to four California charities. The 2005 return , the most recent available, shows a fair market value of $50 million and donations of over $6 million. A 2003 article in the Business Journal serving Greater Milwaukee noted that the trust had hired Merill Lynch to find a buyer for Pabst, since federal law required the divestiture of the asset within 5 years of its acquisition. No buyer has appeared, nor has any action been taken to force the divestiture.

Pabst? I don't buy it!

FUN FACT:

In Missouri, the Kansas City Tribune notes that Boulevard Brewing Company is the largest Missouri-based brewery, now that Anheuser Busch has gone international. Boulevard produces 145,000 barrels of beer annually, or about 1 barrel for every thousand produced by AB. In Milwaukee, the news of the loss of the Miller headquarters to Chicago was tempered by news that production at the plant would increase from 6.6 million barrels to 10 million barrels. In St. Louis, however, the public has been slow to accept the news that their city is no longer the headquarters of the world's largest brewer. Will this open up an opportunity for Miller to gain share in the Show Me state?

--Michael Horne