Pyramid Brewing and Magic Hat announced today that they will merge, pursuant to a letter of intent. According to the terms of the agreement, Magic Hat will acquire Pyramid in an all-cash offer and then the two will merge.
From the press release:
The proposed transaction is subject to the negotiation and execution of a definitive merger agreement. The merger agreement will provide for a first-step tender offer for outstanding Pyramid shares by an acquisition entity wholly owned by Magic Hat, to be conditioned upon the acquisition of at least 66 2/3% of the outstanding shares of Pyramid. The tender offer, if consummated, will be followed by a merger of Magic Hat’s acquisition entity with and into Pyramid. The proposed transaction is also subject to the satisfactory completion of a due diligence review by Magic Hat of the business, financial and legal affairs of Pyramid, and receipt of necessary consents and approvals of regulatory agencies and third parties.
The closing of the proposed transaction, subject to the conditions referred to above, is anticipated to occur not later than August 31, 2008. The board of directors of Pyramid has approved the transactions contemplated by the Letter of Intent.
“The combination of these two well established, high profile craft breweries will be very complementary given our respective brand portfolios and the geographies in which we predominantly operate. Additionally, there will be a number of important benefits for Pyramid to be part of a private company versus continuing to operate as a stand alone public entity. This consolidation makes both good strategic and financial sense and is well timed, particularly as the beer industry’s competitive dynamics continue to intensify,” said Pyramid CEO Scott Barnum. “The Company will continue to have offices in Seattle, its historical home, and will seek opportunities to capitalize on the enhanced assets and capabilities of the new combined entity,” he added.
Martin Kelly, CEO of Magic Hat said, “We have a great deal of respect for Pyramid’s brand heritage, award-winning beers and its dedicated employees, and look forward to consummating this transaction, which provides both strategic and financial benefits both to Pyramid’s and Magic Hat’s stakeholders.”
Hmm, not sure what to make of this yet. I’m not generally a fan of small companies becoming bigger through merger, but who knows. There’s certainly no market overlap between the two, so perhaps it will beneficial for both. We’ll have to wait and see.
After initially posting this, an industry insider friend of mine opined offline that he knew that Alan Newman, the owner of Magic Hat, had been looking for a way to get his brands to the left coast. Pyramid has a excellent distribution network which would be very beneficial to Magic Hat in reaching stores shelves out here. Both brands do pretty well in their own markets and so perhaps there is a mutual benefit. As my friend put it, it’s “a real make-sense deal.”