Monday, June 11, 2007

Private Vs. Public Monopoly

Those who complain loudest about State/public monopolies become strangely quiet when privatization leads to the inevitable creation of private market monopolies, as is the case with the privatization of liquor stores in Alberta.

And note these private beneficiaries of market monopoly are Income Trusts to avoid paying taxes.

Liquor Stores Income Fund has completed its takeover of Liquor Barn Income Fund, creating Western Canada's largest independent liquor retailer, with 188 stores in Alberta and British Columbia and a market capitalization of about $470 million.

One analyst, who asked to remain anonymous, said booming economies in Alberta and British Columbia have made things difficult for privately owned liquor stores in some ways.

Stores face challenges in recruiting enough staff to maintain regular business hours, he said. With the major liquor retailers paying higher wages, that becomes especially difficult for smaller operations.

"If you can't compete for employees as a single-store owner, then you put more hours into the store personally, and that gets tiring. Those people might look to sell their stores to some of the consolidators," the analyst said.

The deal creates a company with 188 liquor outlets in Alberta and B.C. and a market capitalization of about $470 million. Liquor Stores previously has 107 outlets to Liquor Barn's 81.


- 2006: Liquor Stores CEO Irv Kipnes approaches Liquor Barn about a possible acquisition, but they are not interested.

- February, 2007: Liquor Stores makes a proposal to acquire Liquor Barn for .53 units, which is rejected on March 8. The bid is not communicated to the market.

- April 10: Liquor Stores launches a hostile bid of .53 units, and at this time the February offer is revealed.

- April 19: Liquor Barn board recommends rejection of the offer.

- May 28: A sweetened offer of .57 units is made, which the Liquor Barn board unanimously accepts two days later. The deadline for the offer is extended until 1 a.m. June 8.

- May 30: Liquor Barn CEO John Mather and several other unitholders say the new offer isn't rich enough. Mather, who has bought an additional $7.2 million worth of Liquor Barn units, is put on paid leave by his board.

- June 7: Liquor Stores says it has all but two of the founding Liquor Barn unitholders committed, but at market close is still short of the 66.7 per cent needed to close the deal.

- June 8: Liquor Stores says it has completed the acquisition with 74 per cent of Liquor Barn unitholders voting in favour of the deal.



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