SUN Brewing (A)

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HARVARD’ BUSINESS SCHOOL
9-207-022 REV JUNE 2, 2013
HELEN VILLALONGA RAPIIAEL AMIT
SUN Brewing (A)
In the cold Russian winter of 1998-99, Shiv Vikram Khemka, Executive Director of SUN Brewing Ltd., sat in his Moscow office with his father and Chairman, Nand Khemka, and Shiv’s younger brother and Board Member, Uday, to discuss the options for their company and for the family’s controlling interest in it. SUN Brewing, a subsidiary of the Khemka family’s business group, had become the second largest beer producer in Russia since its founding in 1992. Following the massive devaluation of the rouble in August of 1998, SUN Brewing, which was publicly listed on the Luxembourg stock exchange, had seen its stock price decline by over 90%. Only two months earlier they had been planning a $200-$400 million equity and debt offering on the New York Stock Exchange. The capital was needed to finance major investments in the face of increased competition from international beer companies in the Russian market. However, the rouble devaluation and the deep financial crisis that ensued had led to the cancellation of the proposed NYSE listings, and to a $40 million bridge loan that now needed to be repaid. The family was debating the merits of two main alternatives: Should they bring in a major global beer company as a strategic partner at this difficult time? Or should they stay on as controlling owners, inject millions of dollars into the company from other parts of the family business group, and weather the storm until better terms could be expected from any outside capital provider?
The Khemka Family Business Group Nand Khemka, the youngest of seven brothers, came from a family with deep roots in India’s business community. The family’s initial grain trading business was started around 1900. Originally from the state of Rajasthan in western India, the family had moved to Bihar and then to Calcutta, where Nand’s older brothers built up a commodities trading business. Over time, the family business evolved to be a supplier of raw materials for industrial products, including iron ore and manganese ore, which they soon began exporting to Japan and Eastern Europe. By the 1950s, the Khemka family business was one of the leading international suppliers of iron and manganese ores to the coal and steel industries from India. In 1956, after completing an M.S./MBA degree at Columbia Business School , Nand Khemka started to work at the family business group out of their Tokyo office, selling iron ore to the fast-expanding Japanese steel industry. The Khemka family was part of the entrepreneurial Marwari community. From their origins in the Rajasthan desert, Marwaris, known for their frugality and business acumen, had spread all across
Professor Belen Villalonga and Professor Raphael Amit of the Wharton School prepared this case with the assistance of Global Research Group Senior Researcher James Quinn. FIBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright C 2006, 2007, 2008,2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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