Acquisition - Replacement

Blavod Black Vodka PLC
08 December 2003

The Blavod Black Vodka PLC announcement released under RNS 9650S at 07:01 today
contained elements  of draft text which have been removed.  No material changes
have been made.  The full amended text is shown below. 




                      NOT FOR RELEASE IN THE UNITED STATES

                 Blavod Black Vodka plc ('Blavod' or 'Company')

   Proposed acquisition ('Acquisition') of the business and assets of Extreme
                       Beverage Company, LLC ('Extreme')
                        Proposed Placing and Open Offer

              Proposed change of name to Blavod Extreme Spirits plc



INTRODUCTION

Blavod announces that it is in advanced negotiations to acquire all of the
business, assets and liabilities of Extreme for an all share consideration in
conjunction with a proposed Placing and Open Offer. Following the acquisition,
Extreme will own new Blavod shares comprising 40 per cent. of the Company's
issued share capital as enlarged by the acquisition, before taking into account
the new Blavod shares to be issued pursuant to a proposed Placing and Open Offer
to raise approximately £8 million (before expenses) for the Group as enlarged by
the acquisition ('Enlarged Group'). Additional deferred share consideration will
be payable to Extreme upon certain price thresholds of Blavod's shares being
reached (the 'Deferred Consideration'). Although these negotiations are still to
be finalized and there can be no assurance that this transaction will proceed,
the Company hopes that it will be able to announce the final terms of the
Acquisition and the Placing and Open Offer later this month.

The proposed Acquisition will be classified as a 'reverse takeover' under the
AIM Rules by virtue of its size. As such, the Acquisition, as well as the
Placing and Open Offer, will be subject to the approval of Shareholders. In
addition, the Acquisition will be conditional upon the approval by Shareholders
of certain other matters including, inter alia, a waiver of Rule 9 of the City
Code on Takeovers and Mergers (the 'City Code').

The Board of Blavod is also pleased to announce the appointment of Evolution
Beeson Gregory Limited as its Nominated Adviser and Broker.

ENLARGED GROUP OVERVIEW

Information on Blavod

The Company launched Blavod in 1998 as the only vodka which is black in colour.
The Blavod brand is registered and protected in over 34 countries. Its
production is outsourced to a licensed manufacturer. It has an established UK
sales network with distribution in several major retail outlets, including Asda,
Sainsbury's and Tesco. Blavod also has the UK distribution rights for Domaines
Barons de Rothschild (from May 2001), Mickey Finn's Schnapps (from October 2001)
and Fernet Branca (from May 2002). Its international distribution network has
expanded with success in the worldwide duty free and other key markets including
the Russian Federation.

Recent press coverage in the US such as the Martha Stewart lifestyle magazine
and a review by the Los Angeles Times has significantly increased the interest
in the brand in America. The Directors believe that this recent rise in interest
has been buoyed by the Chicago-based Beverage Testing Institute giving Blavod
its second highest rating and stating that Blavod 'is a very good vodka'.
Despite the recent rise in sales and critical acclaim, the US remains the only
significant foreign vodka market in which Blavod has yet to make inroads and the
Directors believe that it is its single biggest market opportunity.

Since its flotation in 2001, case sales of Blavod vodka have grown by
approximately 63 per cent., its production costs per case and overheads have
each decreased by approximately 30 per cent. and gross margins have increased
with higher volumes.

Blavod's portfolio

   • Blavod Black Vodka - a pure vodka distilled with the Black Catechu herb
    to create a neutral tasting vodka which is black and which is suitable for
    creating different styles of cocktails


   • Domaines Barons de Rothschild (Lafite) Wines - wines from France, Chile,
    Argentina and Portugal to which Blavod has distribution rights in the UK


   • Mickey Finn's Schnapps - a range of natural flavoured Schnapps which
    Blavod distributes in the UK to several major outlets, such as Asda,
    Sainsbury's and Tesco


   • Fernet Branca - spirit brands produced by a premium Italian distillery,
    to which Blavod has distribution rights in the UK.

Information on Extreme

Extreme, based in Nashville, Tennessee, is the owner of Players Extreme, one of
the fastest growing brands in the US spirits market. An innovative, dynamic
spirits company created by Jeff Hopmayer in 2001, Extreme owns the Players
Extreme Vodka, Players Extreme Flavoured Vodkas, Players Extreme Rum, Players
Extreme Flavoured Rums and Players Extreme Gin brands.

After obtaining the necessary licences and approvals in the US, Extreme began
trading in January 2003. By November 2003, it had sold approximately 60,000
cases. This sales figure is greater than most of the top vodka brands in the US
managed to achieve in either their first or second year of trade. Like Blavod's,
Extreme's production is outsourced to a licensed manufacturer. Distillation
utilises proprietary flavours to create smoothness and significantly greater
flavour concentration than rival products. Extreme's brands won four world
spirit competition awards in 2003. Extreme has extensive US distribution
capabilities - its products are currently sold by approximately 40 distributors
across the US.

Key strengths of the Enlarged Group

The proposed Enlarged Group Board (set out below) considers that the following
will be the Enlarged Group's strengths:

   • an Enlarged Group Board and management team blending industry experience
     with entrepreneurial flair and a proven track record in creating
     international brands


   • a portfolio of fast-growing brands


   • wide distribution capability and local sales presence in the critical US
     market


   • marketing expertise


   • financial strength


   • an opportunity to capture a share of a global market.

Brand positioning

Blavod and the Extreme brands are premium spirits that the proposed Enlarged
Group Board believes are ideal for use in contemporary cocktails.

Blavod's target market is vodka consumers in the 18-35 age group. Blavod is
establishing a vodka brand with an image that is premium, contemporary, unique,
cosmopolitan and international.

Extreme has an extensive range of award-winning vodka, rum and gin brands. Its
target market is the American 21-35 age group: sophisticated, culturally and
ethnically diverse.

The proposed Enlarged Group Board believes that the respective Blavod and
Extreme brands are highly complementary.

CURRENT TRADING AND PROSPECTS

Your attention is drawn to the continued improvement in trading as shown by the
full text of the announcement today of Blavod's unaudited interim results for
the six months ended 30 September 2003. The Board is confident that, in the
second half of its financial year to 31 March 2004, Blavod will come close to
achieving positive cash flow.

As detailed above, Extreme began trading in January 2003 and by November 2003,
had sold approximately 60,000 cases. This sales performance makes Extreme one of
the fastest growing brands in the US spirits market, relative to other brands'
first and second year sales.

Extreme's sales are broadly spread across its various brands and the proposed
Enlarged Group Board believes that the combination of the two portfolios will be
more attractive to US distributors.

VODKA - THE MARKET OPPORTUNITY

The US vodka market, at 38.9 million cases per year, is over 6 times the size of
the UK's (which is the largest market in Western Europe), 10 times the size of
Germany's and 57 times the size of France's. Between 1995 and 2001 the US market
grew on average 2.0 per cent. year on year. The forecast growth (to 2010) in the
US is expected to be even higher still, with flavoured and ultrapremium vodkas
predicted to enjoy the greatest future growth. (Sources: Impact US Spirits
Databank and Review, Aroq Ltd 2003 and Adams Liquor Handbook 2002)

Vodka's growing popularity in America has been fuelled by the US's bar culture
where the consumption of vodka based cocktails has been increasing. The proposed
Enlarged Group Board believes that, in this environment, Extreme's portfolio of
spirits will stand it in good stead as bars look to create better cocktails with
the use of these new flavours. It is in the flavoured vodka market that growth
in sales has been most impressive. In addition Blavod's black colour is a major
differentiator as bars are continually trying to improve the visual impact of
their drinks to generate customer interest.

Extreme's US distribution capability, its relationship with its US distributors
and its growing profile in the US make the Acquisition attractive to Blavod. In
addition to gaining the benefits of Extreme's growing market share in the US,
Blavod will also gain access to Extreme's US distribution network allowing
Blavod to be exposed to a large and growing market that Blavod has not to date
been in a position to exploit.

BACKGROUND TO AND REASONS FOR THE PROPOSALS AND USE OF PROCEEDS

Blavod has established a brand presence and distribution capability in the UK,
as well as an international distribution network. However, to date its exposure
to the critical US market has been limited. The Directors believe that strong
distributor relationships are needed to achieve success in the US market and
that Blavod would require significant time to build these on a stand-alone
basis. The proposed combination of Blavod and Extreme would provide Blavod with
access to Extreme's US distribution capability and local sales presence.
Blavod's shareholders could also benefit from the rapid increase in US sales
anticipated in the Enlarged Group's products over the coming years and from the
potential to introduce Extreme's products into Blavod's existing international
markets.

The £8 million (before expenses) proposed to be raised through the Placing and
Open Offer will be used to strengthen the balance sheet of the Enlarged Group
and to fund the costs associated with sales and marketing, capital expenditure
and trade mark protection, as well as funding debt repayment of approximately $1
million and general working capital requirements.

SUSPENSION, DEALINGS AND TRADING

The existing Blavod shares were suspended from trading on AIM on 17 September
2003 and will remain suspended pending finalization of the transaction.

PROPOSED DIRECTORS OF THE ENLARGED GROUP

Summary details of the proposed Enlarged Group Board are set out below:

Allan Shiach, Non-Executive Chairman - the current Non-Executive Chairman of
Blavod, who was previously chairman of Macallan-Glenlivet Plc from 1979 until
1996, helping to establish a highly successful international brand of single
malt whisky, and currently a director of SMG plc.

Jeffrey Hopmayer, Chief Executive - the founder of Extreme two years ago, who
was previously (for over 10 years) President and CEO of Original American
Scones, the then leading bakery/distribution supplier to Starbucks Coffee
Company Worldwide, and which he successfully exited in 1998.

Richard Ambler, Managing Director: International - the current Chief Executive
of Blavod, who previously held senior management positions with IDV, Cinzano
International (part of Diageo) and Mentzendorff & Co.

Fred Read, Finance Director - the current CFO of Extreme, who previously held
senior financial positions at HCA Information Services, Inc., the information
services division of the US's largest healthcare company, and at Private
Business Inc, a company providing services and software to the financial
services industry.

William Philips, Non-Executive Finance Director: International - the current
Non-Executive Finance Director of Blavod, who was previously managing director
of Macallan-Glenlivet Plc and later, Janneau SA (a leading producer of
armagnac).

Lawrence Banks, Non-Executive Director - a current Non-Executive Director of
Blavod, who was previously Deputy Chairman and Chairman of the Corporate Finance
department of Robert Fleming Holdings Limited.

David Falk, Non-Executive Director - the founder of SFX Basketball group, who
has represented many of the NBA's top players, including Michael Jordan and
Patrick Ewing, and also a founding partner in New Urban Entertainment (NUE),
which produces and markets entertainment drawn from the 'urban experience'.

Robert Levin, Non-Executive Director - most recently President, Worldwide
Theatrical Marketing and Distribution of MGM Studios, Inc, and the former
President of Worldwide marketing for both Sony Pictures Entertainment and Walt
Disney Studios.

CHANGE OF NAME

To reflect the new business of the Enlarged Group, it is proposed that the
Company will change its name to Blavod Extreme Spirits plc and an appropriate
resolution will be put to Shareholders at an EGM for this purpose.

WAIVER OF RULE 9 OF THE CITY CODE

Extreme and its members are deemed to be acting in concert in relation to the
Company for the purposes of the City Code and, depending upon the number of new
Blavod shares to be issued to Extreme as part of the Deferred Consideration, may
acquire more than 30 per cent. of the enlarged issued share capital of the
Company following the Acquisition and the Placing and Open Offer. The Panel on
Takeovers and Mergers has, accordingly, been consulted with a view to it
granting a waiver of the provisions of Rule 9 of the City Code, under which, in
the absence of such waiver, Extreme and its members would be obliged to make a
cash offer to all other holders of Ordinary Shares upon the acquisition of 30
per cent. of more of the enlarged issued share capital of the Company.

8 December 2003

This announcement does not constitute an offer to sell any securities in the
United States. The issue of the ordinary shares in connection with the
Acquisition and the offer and sale of Ordinary Shares in the Placing and Open
Offer have not been, and will not be, registered under the US Securities Act of
1933, as amended, and such ordinary shares may not be offered, sold or delivered
to, nor may the Open Offer be accepted by, any US Person (as such term is
defined under Regulation S under the Securities Act).



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