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Danish brewer Carlsberg is buying the 15 per cent of Russia's Baltika that it does not already own in a $1.2-billion deal.

Toby Melville/Reuters/Toby Melville/Reuters

Beating a casino is easy – a punter just needs to keep doubling up until he wins. Of course, before he does he may be taken into a dark alley and "dealt with." Carlsberg knows the feeling. The Danish brewer already has a bloody nose from its bet on the Russian beer market, yet it is going back to raise the stakes. With Monday's announcement that earnings per share fell by 4 per cent last year, it said it would pay $1.2-billion (U.S.) to buy the 15 per cent of its Russian unit Baltika that it does not own. Only four years have passed since Carlsberg's ill-timed £11.5-billion ($18.2-billion) acquisition of assets in Scottish and Newcastle, Carlsberg's joint venture partner in the Baltic states and Russia.

A boost to the Baltika bet is significant as Russia generates about two-fifths of Carlsberg's beer sales. However, the price may upset some Carlsberg investors. Until Monday's 11-per-cent pop in Baltika's share price, it traded at about the same level it did when Carlsberg bought the S&N assets in 2008. And the maximum 1,550 rubles ($52) per share Carlsberg has offered to pay represents a one-quarter premium. All this at a time when a tax increase on beer in 2010 has hurt Russia's beer market. Last year volumes declined by 3 per cent, and further restrictions on the sale of beer will be introduced next year. Compounding the mess, Carlsberg's market share in Russia has fallen 2.5 percentage points to about 37 per cent since 2008. The company's head of eastern Europe cut his losses last November and stepped down.

Carlsberg does have some sound reasons for the Russian buyout. It will eliminate the need for the nod of Baltika's independent directors on key decisions. The country is still the world's fourth-largest beer market by volume, and Carlsberg is the biggest distributor. But it is a declining market at risk of further regulation. And that makes the deal look like Russian roulette.

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