Craft beer mergers, acquisition the last 12 months

Lucid Brewing – American Sky Brewing

In the most recent deal between two U.S. craft breweries, Lucid Brewing from Minnesota acquired American Sky Brewing from Wisconsin. The aggregate production of the breweries in 2014 was less than 5,000 barrels. It has been reported that each of the brand identities will continue and that a significant consideration for the deal was Lucid’s acquisition of a brewery with a tap room, which it did not have prior to the combination.

SABMiller – Meantime Brewery Company

While not a U.S. based deal, SABMiller announced in May 2015 that it entered into an agreement to purchase Meantime Brewery Company, a British craft brewery and an important figure in the U.K. craft beer scene. The deal value was not announced.

This transaction was the only acquisition by a MillerCoors affiliate during this period. There were no additions to the brands of Tenth & Blake, the U.S. craft beer portfolio of MillerCoors, which last acquired Crispin Cider Company in 2012. Given the relative pause in their acquisition activity, MillerCoors will likely move to expand its portfolio of craft breweries over the next 12 months.

Enjoy Beer LLC – Abita Brewing Company

In April 2015, a new craft beer investment entity, Enjoy Beer LLC, announced its first investment, an ownership stake in Abita Brewing Company.

Enjoy Beer LLC is a craft beer investment vehicle which appears to be structured to invest in breweries as would a private equity fund, making minority investments in various independent brands. The enterprise is being run by individuals formerly associated with Harpoon Brewing, Nincasi Brewing Company and New Belgian Brewing Company. A major source of financial backing for the entity appears to be the exit liquidity provided from the Harpoon Brewing ESOP in July 2014 (see below), as the founder and president of Enjoy Beer LLC was the co-founder of Harpoon.

It remains to be seen how breweries will react to Enjoy Beer LLC as an alternative investment source; however, it may be particularly attractive for breweries looking for equity growth capital and a partner that can provide strategic advice without the strings associated with being a subsidiary of a larger company.

Full Sail Brewing – Encore Consumer Capital

In the only “full sale” of a brewery to a private equity fund during this period, the ownership of Full Sail Brewing passed to the private equity fund Encore Consumer Capital in March 2015. This transaction is groundbreaking for the craft beer industry because Full Sail Brewing was one of the first breweries to embark into an ESOP structure, with an employee-owned trust owning all of its shares. It is now the first to approve of a third-party acquisition of the brewery from that structure.

While already known to practitioners and those employing ESOPs in other industries, the deal illustrates for the rest of the craft beer world that an ESOP is not the end of the road. The ESOP structure is adaptable to changing circumstances like most other corporate governance structures. While ESOPs are being used (and touted in marketing materials) as the choice for brewery owners who don’t want to “sell out” because they value the company’s culture and local image, the Full Sail transaction is a reminder that an ESOP doesn’t prevent future transactions and the trust can approve a later change-in-control.

AB InBev – Elysian Brewing

In a surprising acquisition of a brewery whose biggest selling pale ale says “Corporate Beer Still Sucks” across the label, AB InBev acquired Elysian Brewing in January 2015. With this acquisition, AB InBev’s craft portfolio now includes four major craft brands in different parts of the country.

The deal is the latest transaction in a flurry of AB InBev deal making. With Ten Barrel and Blue Point under its belt, the Elysian deal marks AB InBev’s third acquisition since the beginning of 2014, a span of time during which MillerCoors has made no U.S. acquisitions.

The jury is still out on how this transaction will play out for Elysian (which will no longer be considered a “craft brewery” under the Brewers Association definition), AB InBev and craft beer drinkers. While most would concede that a similar acquisition by AB InBev, the Goose Island purchase, has worked out fairly well (same quality and larger distribution), the Elysian ownership transition has been bumpy so far. First, the deal became a focal point in a backlash against AB InBev because of its anti-craft Super Bowl advertisement, which mocked craft beer drinkers as “fussing” over beer and poked fun at a hypothetical “pumpkin peach beer” oddly similar to a beer made by Elysian. Second, only three months after the transaction, Elysian’s co-founder and head brewer resigned, which was reportedly partially instigated by the Super Bowl advertisement.

Bayhawk Ales – Evans Brewing Company

While control of Orange County based Bayhawk Ales passed to the founders of Evans Brewing Company back in 2013, Evans Brewing Company filed a Registration Statement on Form S-4 with the Securities and Exchange Commission in 2015 for the issuance of 4,448,624 shares (for up to $1,048,950) in connection with an Asset Purchase and Share Exchange Agreement with Bayhawk.

In this S-4, Evans Brewing Company announced that “its management plans to… develop a relationship with a market maker to submit an application to FINRA for listing [its] common stock with the OTC Bulletin Board or the OTC Markets.” In the event that public trading of the stock of Evans Brewing Company goes active, it would make it only the third U.S. craft brewery to have an active public market for its stock.

Founders Brewing Co. – Mahou San Miguel

In December 2014, Founders Brewing Co. sold an undisclosed minority stake to Mahou San Miguel, the largest Spanish beer company. Founders announced the deal as a transaction to obtain liquidity for longstanding shareholders, while ensuring the company would be family-run for multiple generations.

As with the deal with Firestone and Duvel, Founders’ deal shows that strategic investments in U.S. craft breweries are being increasingly pursued by large breweries other than AB InBev and MillerCoors and suggests that other entrants to this market will soon be on the horizon.

Green Flash Brewing – Alpine Beer Co.

In a transaction between two San Diego-area breweries, Green Flash Brewing acquired Alpine Beer Company. There are two industry-wide take-aways from this deal. First, it is another reflection that many of the large craft breweries (Green Flash was in the top 50 in 2014 production according to the Brewers Association) are pursuing growth opportunities through acquisitions, rather than only organic growth. Second, the deal – primarily a purchase of Alpine’s IP and brewpub operation – is a reminder to small growing breweries of the importance of brand and IP protection on the value of their business. Green Flash was already producing a large portion of Alpine’s beer under a contract brewing relationship and Alpine’s distribution reach was fairly limited. With Green Flash at the helm, we can expect the production and distribution of Alpine beers to expand significantly.