Cobra beer founder wipes out shareholders

By Sarah Bridge for The Mail on Sunday
Updated:

 

When Cobra Beer went into a pre-pack administration last month, emerging a day later under the ownership of US brewer Molson Coors, creditors lost £75m.

Karan Bilimoria

Untimely advice: Lord Bilimoria

If any of those creditors have £8.99 spare they may consider purchasing a just-published copy of Against The Grain - Lessons In Entrepreneurship, written by Cobra's founder Lord Bilimoria and full of tips on how to be a successful entrepreneur.

'For many fast-growing companies, maintaining adequate cash flow is a perennial issue,' he wrote, just months before Cobra ran into financial difficulties of its own. The company that Bilimoria founded 20 years ago never recorded a profit and lost £15.9m in 2008.

In his book, Bilimoria says people invested their children's school fees in his fledgling company. 'The individuals who bought ordinary shares back in the early Nineties have done very well out of their investment,' he writes. 'The company at the time was valued at £1.5m. Today Cobra, in equity, could be valued at approaching 100 times this!'

But Cobra's strategy of putting brand growth before profits meant when it desperately needed new finance, its markets were heading south.

Having touted itself around all the major brewers with a £180m price tag, Cobra failed to find a buyer and was sold to Molson for £14m, which was only enough to pay off the secured creditors.

Unsecured creditors, thought to include US hedge fund Och-Ziff, brewers Wells & Youngs and Camerons and glass maker Quinn Glass, were left with millions of pounds in unpaid debts and shareholders were wiped out.

Cobra, which was funded in its early days by Government startup loans, even left millions of pounds owing in tax.

One unsecured creditor said: 'Feelings are running very high. Its business model was to own nothing except the brand - it didn't even brew its own beer.'

Even Bilimoria's new book turns out to be a reworking of his previous tome, Bottled For Business, published in 2007. The latest version does include a new, final, chapter, on selling the business. Bilimoria concludes: 'Of course, it will not be the end of the journey for Cobra Beer, or for me, but merely the beginning of a new adventure.'

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