NEW OWNERS SOUGHT FOR PABST

 BREWING COMPANY WITH 165-YEAR LINK TO CITY

SAID FOR SALE BY KALMANOVITZ TRUST

(Finally)

By Michael Horne

The New York Post is reporting in an exclusive that Pabst Brewing Company is for sale. Writer Jack Kosman writes that an unnamed individual "with a direct knowledge of the process" claims that "Pabst has hired Bank of America Merrill Lynch to find a buyer and has just sent sales books to prospective suitors. A buyer will need to pay about $300 million, according to sources."

Pabst, which the writer refers to as a "Milwaukee business," (it's based in Illinois, and owned in California) is owned by the Kalmanovitz Charitable Trust, as reported here in Milwaukeeworld back in April 2006,  in response to numerous reader inquiries asking "Who Owns Pabst?"
The Post article says, "The company owns the brands and contracts out its brewing to Molson, the Canadian beer giant"

However, excise tax reports filed with the Wisconsin Department of Revenue show Pabst produced 86,801 barrels of beer in Wisconsin in July 2009, about 3/4 of which was shipped out of state. The beer was brewed under contract with Pabst at the Miller Brewery here. MillerCoors is a joint  venture of SAB Miller and MolsonCoors.


The Kalmanovitz Charitable trust has owned 100 per cent of the shares of S&P Corporation, the Pabst umbrella corporation since the death of its benefactors, Paul and more recently, Lydia Kalmanovitz, who bought the now-virtual brewer in 1984. 

In 2000, the IRS ordered the foundation to sell the brewery by 2005. Failing to attract a buyer, the foundation was given a new deadline of 2010 -- which is nearly at hand.
There is no mention of the sale on the Pabst website.
However, foundation records value the holdings of Pabst at $60,000,000. Yet accumulated losses prior to 2000 have kept the profitable company in the dumps, according to its IRS form 990-PF. 
"Since before 2000 , the Company has suffered significant operating losses in one of its
subsidiaries (with respect to which a consolidated return is filed) and by the end of FY 2007,
there were no current or accumulated "earnings and profits " ("CAEP")."
"Nevertheless, during the course of FY 2007, the Company distributed $200,000 to the Foundation ( see Part III, Line 3).
"Because of the lack of CAEP, the distributions were treated as a non-taxable return of capital,
reducing the tax basis in the shares of the Company owned by the Foundation."

In other words, it looks like they've milked this cash cow about as far as possible.

FUN FACT!

The Kalmanovitz foundation donated over $6 million to charities connected to its three-member board of directors in 2007, a considerable increase in its charitable givings since the original 2006 Milwaukeeworld report. Yet not a single penny of the foundation's beneficence has been to charities in the Milwaukee area.
--Michael Horne

Read more: http://www.nypost.com/p/news/business/hall_of_foam_brewer_goes_on_the_z7AdeaBgH7dlj2xfmJEtTI#ixzz0Vjz9crI2

Here is the 2006 Milwaukeeworld post, followed by a 2008 update.

WHO REALLY OWNS PABST?

[Update: Thursday, July 17th, 2008 -- This posting, now two years old, continues to be a popular one. Over the last couple of weeks there has been a considerable increase in people Googling "Who Owns Pabst?" and I updated this post, and wrote a new one that covers the Pabst reaction to the AB-InBev merger. -- Ed.]

WHO REALLY OWNS PABST?

(An Uncharitable Foundation)

A Milwaukeeworld special

By Michael Horne

Supervisor Roger Quindel made news last week when he introduced a resolution proposing that the Milwaukee County Board rescind its policy of banning the sale of Pabst Brewing Company’s products by Milwaukee County departments. The policy was put into effect in 1996 to express the county board’s disapproval of the closing of Pabst’s Milwaukee plant; the loss of 245 brewery jobs; and the cancellation of health insurance and death benefits for nearly 800 retirees.

The Quindel resolution read, “Pabst is now owned by S&P Company, which is in turn owned by a charitable foundation that has contributed in excess of $15 million to promote colleges, universities and hospitals.”

He then rescinded his own resolution when it turned out Pabst is still in litigation with former employees of the Joseph Schlitz Brewing Company, the brands of which are owned by Pabst. Nice reason, but there are plenty more.

The Kalmanovitz Charitable Foundation is a scam, carrying S&P stock on its books at pennies – or less – on the dollar. The Kalmanovitz Charitable Foundation, the charity in question, donated only $108,000 to charities last year, rather than the $20 million that would have been expected had it honestly stated its assets. [Things have gotten better since this original report. The Foundation's IRS Form 990PF for 2005, ending June 30th, 2006, the most recent on file, shows distributions of $6.5 million that year.--Ed.]

The foundation, named after Lydia and Paul Kalmanovitz, the former owners of Pabst, received 100 per cent of the shares of S&P Corporation in July 2000. The estate claimed a $387.7 million tax deduction for transferring its assets, including Pabst and real estate, to the foundation.

However, the foundation trustees valued the shares they received at only $2 million. That is a $385.7 million discrepancy.

In 1998, the IRS sued the estate of Lydia Kalmanovitz, claiming it understated its tax bill by more than $210 million by the stock transfer.

From 2000 – 2002, the foundation claimed in its tax records that its assets were only $2 million. It was not until its 2003 tax return that it increased the fair market value of the stock – to $10 million. That is probably still one-fiftieth of the true value of the assets, which include considerable real estate in California and the rights to dozens of beer trademarks. [By 2005 the assets were valued at $59 million.--Ed.]

The foundation lists only three trustees – Rev. John LoSchiavo, Bernard Orsi and Conrad Hewitt. LoSchiavo, a Jesuit, is the chancellor of the University of San Francisco, which received $36,000 from the foundation in 2003. That represents one-third of the total charitable contributions of the charity for that year.

Orsi, the president of S&P, is a former trustee of St. Mary’s College, Moraga, California. His alma mater also received $36,000 from the foundation in 2003.

Hewitt, an accountant, is the former Commissioner of the Department of Financial Institutions for the state of California. It is not known if he has any connection to the University of California – San Francisco, but that school also received $36,000 from the Kalmanovitz foundation in 2003. All trustees are unpaid. [Hewitt resigned in 2006 and was replaced with Lou Girardo. --Ed.]

Another complication is that charities are not allowed to own operating businesses according to IRS rules, which apparently do not apply to S&P. As long ago as 1996, William Bitting, a Los Angeles lawyer, former advisor to Howard Hughes, and then one of the three trustees, said, “it’s pretty safe to say that within five years that the Pabst assets will be sold.”

Ten years later, the foundation still owns the brewing company, which does not appear to be for sale.

Although Quindel may have overstated the charitable contributions of the Kalmanovitz trust and its eleemosynary intentions, it is clear that the company founded by Captain Fred Pabst, one of Milwaukee’s most charitable-minded citizens, and most generous employers, fell into a dark hole when it was purchased by Kalmanovitz, who seems to still be running it from his grave.


JULY 2008 UPDATE

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