On April 26, 1976, William Pflaumer acquired 100 percent of C. Schmidt & Sons Inc., a 115-year-old Philadelphia - based brewery, for a price of $15,900,000. What was unusual about the sale was the fact that Pflaumer used only $150,000 of his own money.

It seems that Pflaumer, a convicted felon who started his climb in 1959 as a Philadelphia beer distributor with nothing more than one truck and $7,000 in capital. financed the purchase using Schmidt's own assests as collateral.

And now, it's happening again. Although Schmidt is in dire financial straights, Pflaumer is wheeling and dealing his way into still another takeover - this time targeting an even bigger fish, F&M Schaefer Brewing Co. of New York. Now, he is trying to finance a $6 million deal with $250,000 up front. But Schaefer, which is also experiencing serious financial problems, is fighting the action in federal court in New York.

According to one courtroom observer, "It comes down to two punch-drunk brewers trying to survive on a sea of suds."

Testimony in the case has highlighted the inner workings of the two companies, bringing to light the severe problems they face as regional breweries and providing rare insights into the present and future of the beer industry.

The war for control of Schaefer began on April 3, 1978, when Pflaumer signed an agreement with Citi-bank to acquire 29 percent of Schaefer's stock. Under the terms of the agreement, Schmidt would pay $6 million for $20 million worth of notes held by the bank that would be convertible into 792,232 shares of Schaefer common stock. Pflaumer would pay the bank $250,000 right away, another $500,000 at the time of closing, and the rest in yearly installments. The deal was supposed to close on APril 24.

But on April 11, Schaefer filed suit in U.S. District Court in Manhattan charging Schmidt with violation of the Sherman and Clayton anti-trust laws, and also charging that Schmidt really was attempting to gain ultimate control of Schaefer because it also was trying to acquire additional stock from another source.

That "other source" was investment bankers R. W. Pressprich & Co. Inc. Pflaumer was offering $3 a share for Pressprich's 160,000 shares in Schaefer - an additional 8 percent. Just where Pflaumer is planning to get the cash for these acquisitions remains a question mark. In a filing with the Securities and Exchange Commission, Schmidt says it will finance the purchases from "working capital or borrowings (which have not been arranged)."

In the same filing, Schmidt admits that "the transactions are intended to serve as a first step in the acquisition of control of the operations of (Schaefer)."

On that day, Schaefer President William Schoen wrote an angry letter to Citibank chairman Walter Wriston, charging that the sale "puts our company in serious jeopardy." Schoen was particularly irritated because the sale was being made by the trust department of the bank, while at the same time the commercial side of the bank is "a large tender to our company, and has been for some time . . . (and) they have been very supportive over some difficult periods."

In any event, a federal judge issued a temporary restraining order on April 13 that prevents the closing of the deal pending court hearings which are still going on.

In early testimony during the trial, it was revealed that Schmidt may be on the brink of bankruptcy. Pflaumer admitted in court that liabilities currently exceed assets at Schmidt by $6 million or $7 million, and his company is in a negative working capital position - raising serious, and still unanswered, questions as to how he hoped to finance further acquisitions.

Pflaumer also said that, unless he is able to acquire Schaefer or some other volume brand, Schmidt will be out of business in two years. In detailing the financial woes of Schmidt, Pflaumer said Maryland Corp. of Baltimore could effectively "pull the plug" at any time on Schmidt, which owes the finance company "many millions of dollars."

In questions to Schmidt president William Elliot, Schaefer attorneys tried to establish that one of the main attractions of Schaefer was its new ultra-modern Lehigh Valley plant in Pennsylvania.

The testimony of Schaefer executives also has provided several items of interest. Though he denied that Schaefer was on the selling block, Shoen said mergers had been discussed with other companies.

Olympia Brewing Co. had offered to purchase substantially all of Schaefer for $65 million in September 1977, Shoen said. He added that Miller Brewing Co. and Z. Heilman Brewing Co. also discussed the possibility of buying the new Lehigh Valley plant, and Schaefer was actively pursuing "the possibility of a merger with Pabst brewing."

In an ominous note, it was revealed that Schaefer is planning to shut down its Baltimore brewery and shift that production to Lehigh Valley. That is bad news for Baltimore, which only recently learned that Carling is closing its brewery there.

It also was revealed that Schaefer is planning to test market a new product in June, but the details of venture were deemed "confidential."

Schmidt counters Schaefer's chargers that a takeover by Schmidt would violate antitrust laws with what is called "a failing company" defense. Schmidt is claiming that because Schaefer is also on the verge of going down the tubes, it is permissible for it to be taken over by another firm in the same business. In its 1977 annual report, Schaefer states that income for that year was $910,000 on sales of almost $200 million, but the company's deficit stands at nearly $20 million.

Schaefer's story, and Schmidt's story for that matter, are textbook examples of what has happened to the regional beer business. Since the 1930s, the number of U.S. beer makers has shriveled from more than 500 to less than 50, and the top five firms (Anheuser-Busch, Miller, Jos. Schlitz, Pabst and Coors) now control 70 percent of the market - up from 55.5 percent in 1972. And the top 17 brewers account for 97 percent of all sales. In Philadelphia, for example, there were 42 family-owned breweries during the 1950s. Today, there are two.

And only last week, former Federal Trade Commission official Willard Mueller told the Senate antitrust sub-committee that the future looks grim for all the beer companies except Anheuser-Busch and Miller. He said he expected the two giants to have nearly half of all beer sales by 1980.

The pitiful struggle betweeen financially strapped Schmidt and Schaefer is only one example of a dying breed of brewers fighting for their lives. The battle has degenerated, at times, to a vicious personality clash.

Oddly enough, it may take someone with Pflaumer's ability to turn a quick deal to save any remnants of either brewery. The same man who managed to spend some $15.9 million to buy his first brewery by using only $150,000 of his own cash may have to spend only $1.2 million in cash to buy one of the most modern breweries in the world - worth an estimated $70 million.