The Chicago Syndicate: Heard Off the Street: Talk of Bankrupt Brewer Buying Rolling Rock Doesn't Wash

Tuesday, June 06, 2006

Heard Off the Street: Talk of Bankrupt Brewer Buying Rolling Rock Doesn't Wash

Friends of ours: John "Jackie the Lackey" Cerone

Is April Fools Day being celebrated two months late this year?

Bankrupt Pittsburgh Brewing, the company that can't pay its water and sewage bills on time, that can't keep pension promises to its workers, that is eternally in hot water with vendors for not honoring its obligations, is making noises about being interested in Latrobe Brewing Co.'s endangered plant.

On June 1, Pittsburgh Brewing President Joseph Piccirilli put out a statement saying someone from the office of U.S. Rep. John Murtha, D-Johnstown, told him the congressman wants to discuss the plant with him.

"The Latrobe Brewery is a beautiful facility. I'm in the beer business and it's practically in my back yard," Mr. Piccirilli said. "We are in the midst of union negotiations and we are working very hard to turn our financial situation around. But if we can schedule something, I'll speak with the congressman."

If you're thinking this is akin to Dracula offering to give someone a transfusion, you're not too far off the mark. Mr. Piccirilli will be hard-pressed to find investors willing to finance his efforts to extract himself from the hole he's made at Pittsburgh Brewing, much less shower him with mad money to work his magic in Latrobe.

To be sure, even well-managed brewers such as Anheuser-Busch, which is purchasing Latrobe's Rolling Rock brands and moving production to Newark, N.J., have problems these days. Anheuser-Busch's decision will put about 200 workers at the Latrobe plant out of work if another buyer for the facility isn't found.

"It's a very tough time to be in the beer industry," said Brent Wilsey of Wilsey Asset Management in San Diego. "It's just not the product that's desired in this generation."

Lawrenceville-based Pittsburgh Brewing had serious issues long before Mr. Piccirilli's stewardship commenced. The company's two previous owners ended up in prison, which explains why Mr. Piccirilli's investment group had to purchase the brewer at a bankruptcy court auction in 1995.

The losing bidder was former Pittsburgh Brewing chief executive Harvey Sanford, a savvy operator credited with reviving sales of the company's I.C. Light.

"Harvey's major disadvantage as a bidder was that he understood the business and wasn't willing to overpay. He may have had a better shot if he didn't understand the business," Cris Hoel, an attorney who advised Mr. Sanford at the auction, said when his client died in 1997.

"Events have demonstrated, and may continue to demonstrate, that both the brewery and a lot of people would have been better off if Harvey had been able to acquire the brewery," Mr. Hoel stated in the Post-Gazette's obituary on Mr. Sanford.

Mr. Hoel was part of a group of investors who hoped to acquire the Latrobe plant and keep brewing Rolling Rock there. Like Mr. Sanford, they were outbid, but not necessarily outsmarted. Like the collar on a good beer, Mr. Hoel's assessment has held up well in the nine years since his client died.

Changing consumer tastes would have challenged Mr. Sanford's management skills. But there's little doubt he would have taken a more disciplined approach than Mr. Piccirilli, the son of a garbage hauling company owner. Major banks would have financed Mr. Sanford's ownership while Mr. Piccirilli is being bankrolled by lawyer Jack Cerone, the son of the former Chicago Mafia underboss John "Jackie the Lackey" Cerone.

A recent court filing by one of Pittsburgh Brewing's creditors illustrates Mr. Piccirilli's management practices. MeadWestvaco leased some packaging equipment to the brewery. When the lease expired at the end of February, Pittsburgh Brewing failed to make a required payment of about $64,300. Moreover, it kept the equipment and has not made monthly rent payments of $4,500 since then, MeadWestvaco alleges in a May 23 filing. The situation's the same for other equipment covered by a separate lease, the supplier stated in a motion seeking payment.

Does this sound like someone with sufficient financial wherewithal and the requisite business acumen to be considered a viable steward for the Latrobe Brewery? Should someone who can't make monthly payments of $4,500 -- not to mention Pittsburgh Brewing's more glaring delinquencies -- be trusted with the future of the Latrobe workers whose jobs are on the line?

Then again, perhaps investors would finance a Pittsburgh Brewing acquisition of the Latrobe plant based solely on the $9,000 loan payments Mr. Piccirilli faithfully sends to Mr. Cerone each week.

Cindy Abram, a spokeswoman for Rep. Murtha, said media reports that her boss is brokering a deal between Latrobe and Pittsburgh Brewing are exaggerated. She acknowledged there have been phone discussions with interested parties, including Pittsburgh Brewing, but said they have been "very, very preliminary."

The government officials diligently trying to secure the future of the Latrobe Brewing plant will consider offers only from responsible parties. Gov. Ed Rendell has asked Renaissance Partners, an investment banking and business consulting firm, to assess the situation and make recommendations.

If that process is as sober as it should be, it's hard to imagine the fate of the Latrobe plant being entrusted to someone with the track record Mr. Piccirilli has made for himself at Pittsburgh Brewing.

Thanks to Len Boselovic

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