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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.”

According to a news radio station in Seattle, Washington, KOMO Radio, farmers in the Yakima area have responded to the rising price of hops and are pulling out other crops to plant hop rhizomes this year. From the report:

Growers are feverishly reconditioning yards and adding new land at an unheard-of pace. Growers are receiving multiple-year contracts with prices front-loaded to help them shoulder the estimated $6,000-per-acre cost to plant yards and also upgrade equipment.

I presume the acres mentioned in this report are in addition to the 6,000 of high alphas that was announced in January at the hop growers convention.

Ralph Olson, general manager of grower-owned HopUnion of Yakima, a buyer who deals primarily with smaller craft brewers, thinks the figure may be closer to 8,000 acres by the time all is said and done. That would be a jump of nearly 25 percent in acreage in one year.

That would suggest an additional 2,000 acres, of which hopefully at least some will be aroma hops. There’s been a lot of speculation but no one’s been sure what would happen this year. Now that spring is upon us and it’s time to start planting, it’s looking like more hops are being planted than previously expected. If that trend continues in other places where hops are traditionally grown then that’s very good news indeed.

Today is Dave Buhler’s birthday. Ironically, like Dick Cantwell, whose birthday was yesterday, Dave is also a co-owner of Elysian Brewing in Seattle, Washington. Happy birthday Dave.

Fal Allen and Dave Buhler at OBF.

Dave and Celebrator publisher Tom Dalldorf (at right). Neither Tom or I could identify the fellow in the middle, sorry about that. Can anybody help me out and tell me who that is?

Portland beer writer Lisa Morrison catches Dave in a “See Food” moment.

Today is Dick Cantwell’s birthday. He’s the head brewer and co-owner of Elysian Brewing in Seattle, Washington. Happy birthday Dick.

Award-winning Portland beer writer Lisa Morrison and Dick Cantwell at an Elysian event during OBF.

Showing the proper way a hipster dons his chapeau.

Enjoying a pint at the Falling Rock in Denver during GABF week.

Working the judges at the Celebrator Swimsuit Contest at CBC in San Diego. This year, in fact, the Craft Brewers Conference will again be in San Diego.

The full quote from Proverbs 16:18, at least in the King James’ version, is “Pride goeth before destruction, and an haughty spirit before a fall” but the more common shortened version says it all. Essentially, the modern meaning of this proverb is not to be overly confident, especially in yourself, or you’re likely to have something bad happen to put you back in your place. If you allow yourself to become full of pride, you will find yourself humiliated. Be modest, that’s good advice to remember. It’s what happened to me on Sunday, and I offer up my cautionary tale by way of illustration.

I’ve done my fair share of prolonged drinking over the years, and rarely have I not been able to muddle through to the end. We (and by we I mean those of us who have been regularly attending GABF for many years) generally say about the Great American Beer Festival—by way of advice—that it’s a marathon, not a sprint to suggest that pacing is very important to a full enjoyment of the week’s events. So when I was invited to the 4th annual Keene Tasting on Sunday, the day after the Hard Liver Barleywine Fest at Brouwer’s Cafe, it simply never occurred to me that I wouldn’t be still standing after twelve hours and 150 beers. Alas, my body had other plans for me.

At 11:00 a.m., with our first beer of the day. Things went fine through the first 50 beers or so, when suddenly and quite unexpectedly I felt cold shivers shoot through my body. Initially undaunted, I assumed that the open windows letting in the fresh Seattle air had simply chilled the room so I put on my jacket and resumed tasting. But after another half-hour of involuntarily shivering it became obvious that all was not well and my body had decided to pitch a fit. I felt fine, apart from the chills, and struggled through until we almost reached the half-way point, 75 beers, and it was time for another break. I hunkered down in a comfy chair during the break and tried to will myself to warm up, but it did no good. When tasting resumed, I stayed put figuring I should not ignore my body’s tantrum, and still hoped it was just a temporary thing and my recovery was minutes away. A few kind souls asked if I was okay (perhaps I looked as bad as I felt) and I nodded and muttered that I was fine. But as more time passed and I was feeling worse, I decided to spare myself further humiliation and called in the evacuation troops — my wife — to come and collect me. About an hour later I was standing out front shivering in the cold and waiting for her arrival to whisk me to safety and nurse me back to health. This proved trickier than I might have imagined. Whether my weekend drinking had finally lowered my immune system to the point where I got the flu that’s been circulating in my friends and family for weeks or I simply drank too much, too fast, I can’t really say. All I know is that my chills turned to heat as I burned off a fever so bright that my wife said my skin was hot to the touch like an old-fashioned radiator and that she couldn’t even lie near me because I was radiating so much heat. By morning I only felt lousy, a distinct improvement. But that was nothing compared to the disappointment at not finishing the tasting. Perhaps I was at least a source of amusement for those I left behind, as I heard Bonney calling my name from the window above me as I waited for my ride. I called up, but I don’t think he heard me. C’est la vie. There’s always next year.

Our hosts, Vern and Bonney, the two Matts, during a toast to Michael Jackson’s memory with the beer made by Pike Brewing for the Michael Jackson Tribute dinner held the night before in Philadelphia. The first half of the tasting I enjoyed immensely, right up to the point where I had to leave or die.

For many more photos from at least the first half of the Keene Tasting, including some bottle shots of the beers sampled, visit the photo gallery.
 

The 6th annual Hard Liver Barleywine Fest took place — as it has for the past four years — at Brouwer’s Cafe at the corner of 35th and Phinney in Seattle, Washington. There were 45 barley wines on tap and the place was packed from the time it opened at eleven until I left around five o’clock. With so many tasty treats, the Hard Liver was certainly hard on your own liver.

The packed crowd at Brouwer’s enjoying barley wines from the second-floor balcony.

Festivals hosts Matt Bonney and Matt Vandenberghe, co-owners of Brouwer’s Cafe.

For many more photos from this year’s Hard Liver Barleywine Fest, visit the photo gallery.
 

Here are the results from the 2008 Hard Liver Barleywine Fest in held at Brouwer’s Cafe in Seattle, Washington:

• 1st Place: Mirror, Mirror ‘07; Deschutes Brewing
• 2nd Place: Big Nugget ‘06; Alaskan Brewing
• 3rd Place: Bigfoot ‘07; Sierra Nevada Brewing

Congratulations to all the winners.
 

A great friend of mine, who lives in Seattle, has a new CD out with his new band, called Dyslextasy. Four out of the six songs on it have something to do with enjoying a tipple now and then. The album is called “Live. Die. Repeat.” and has this great tagline: “Drinking songs for the New World Order.”

The last song on the compact disc is an anti-war song that was even inspired by Rogue’s Imperial Stout and the red star on the old label before they switched to the ceramic bottle. The first line of the song is:

As I was sitting there, at the bar
Drinking Imperial Stout
(that one with the star)

Click on the play button below to hear the Imperial Stout song. You can also hear previews of the other songs on their website. The CD is a mere eight bucks and can be ordered online directly from the band or on several other online stores, such as CD Baby. Sure it’s a shameless plug, but as he and his wife are some of our best friends, and the music is great, too, I want to help it go platinum so he can retire from his nine-to-five job. Enjoy.
 

Even for those of you old enough to remember Thomas Kemper beer, not just the soda, you may not have known that there never was a Thomas Kemper. Instead the name came from the family names of the two founders, Andy Thomas and Will Kemper, who began brewing on Bainbridge Island in 1984 and soon after moved the brewery to the small town of Poulsbo, Washington, on the Kitsap Penninsula. My wife and I visited the brewery on our honeymoon in the summer of 1996. That was four years after it had been sold to Hart Brewing (later Pyramid Brewing). Initially ales were made under the Pyramid label and lagers under Thomas Kemper. For a trip down memory lane, check out their old labels at Corey and Nate’s Beer Labels website. Rande Reed, in fact, was the brewer there early on but later moved to Pyramid and then Snoqualmie Falls Brewing, before returning to musical pursuits.

But I was never sure what happened to the founders after their involvement ended. In turns out Will Kemper became a brewery consultant, helping launch such breweries as Philadelphia’s Dock Street, Seattle’s Aviator Ales, Capital City Brewing in D.C. and Denver’s Mile High Brewing. For the last year or so, Will and his wife Mari have been in Turkey, building a brewery in Istanbul called Taps. Now that the Taps project is completed they’ve returned to their home in Bellingham, Washington with plans to open a new brewery there this spring. It will be located in the Old Town part of town and have a capacity of 1,000 barrels, with expansion to 5,000 possible if successful. The new name will be Chuckanut Brewery & Kitchen, and the plan is to have six different beers and a lunch and dinner menu.

Last week Miller’s Brew Blog revealed that Costco was brewing up three private label beers under the Kirkland private label brand name. Today they’re reporting a fourth one, this time a German Lager. So the news for smaller brands in Costco stores is even more grim. As I opined last week, these Costco Beers will more than likely displace existing beer skus.

The German Style Lager label.
 
 

The back label tells the tale.
 
NOTE: Noble Beer News has posted all four of the labels if anyone is keen to see them. I knew all the illustrations on the labels would have something to do with brewing, but curiously the Amber Ale drawing is of Weyermann Specialty Malts, a malthouse in Bamberg that I visited in November. I wonder if owners Thomas and Sabine are aware of that?

In related Costco news, Miller’s Brew Blog is reporting that the big box store chain will be creating three private label beer brands under the Kirkland name: a hefeweizen, amber ale and pale ale. The Gordon Biersch production brewery in San Jose, California — who also makes competitor Trader Joe’s private label beers — will be brewing the beer for Costco. Private label products tend to have higher profit margins than regular brands, so undoubtedly that’s the motivation here, as well. Given that most Costco stores carry only a very few beers, and even fewer craft beers, this strikes me at first blush as another bad omen for better beer. I doubt they’ll be increasing the number of beer skus each store will carry but more likely will shove less well-established local brands out the door to make room for these.

According to a breaking news press release I received from the National Beer Wholesalers Association (NBWA), the Ninth Circuit Court of Appeals has reached a verdict in the lower court’s earlier decision in Costco v. Hoen (Washington State Liquor Control Board), reversing a majority of it, which, according to the NBWA, “thereby affirm[s] the right of the states to regulate alcohol under the 21st Amendment – a system that works to protect the citizens of each state. While NBWA is still reviewing the totality of the Court’s opinion, it appears that state regulation has been validated.”

Disappointingly, the Seattle Post-Intelligencer’s report on this begins with the following loaded sentence. “A federal appeals court Tuesday dealt Costco Wholesale Corp. a setback on whether the giant warehouse club operator could lower prices of beer and wine for its customers.” I realize that was in the business section, but so much for impartiality. Swallowing Costco’s propaganda entirely, to say they sued the state so they could lower prices to consumers is at best not telling the whole story and at worst and out and out fabrication.

Of the nine laws and regulations Costco claimed restricted competitive practices, U.S. District Court Judge Marsha Pechman agreed and ruled over a year ago in their favor. Today’s appeals ruling reversed eight of those, with the exception of the post-and-hold requirement. It appears likely that it may now be appealed to the Supreme Court. According to the PI, “The 9th Circuit Court of Appeals said the state Liquor Control Board could prohibit discounts, ban central warehousing of beer and wine by retailers, require wholesale distributors to charge uniform prices to all retailers and require a 10 percent markup. The state had said if Costco won it could put into question the systems other states use to control alcohol consumption and safeguard the collection of taxes. At least 30 other states or jurisdictions had filed briefs in support of Washington.”

Reuters, on the other hand, more even-handedly stated that Costco “lost a bid on Tuesday to overturn Washington state liquor rules that control pricing and discounts.”

The Seattle Times and the Wall Street Journal have also now weighed in with stories of their own.

From the Wall Street Journal:

Costco’s 2006 triumph attracted a lot of attention because it suggested that major changes might be in store for the nation’s complex system of regulating alcohol sales. Changes in Washington state could have a ripple effect, because most states have similar laws.

Costco is challenging a regulatory architecture that dates to the repeal of Prohibition and was designed partly to discourage overconsumption of alcohol. Makers of alcoholic beverages sell to a distributor, which marks up the price and trucks it to a bar, restaurant or store, which then sells it to a consumer.

Costco is deciding whether to appeal the ruling. “We are pleased that the central part of the anticompetitive restraints provisions was struck down,” said David Burman, a Seattle-based lawyer handling the case for Costco, referring to the “post and hold” provisions. “It will be good for Costco members and other consumers.”

Seventeen other states have post-and-hold laws, Mr. Burman said. He added that he thinks Washington lawmakers “will likely” consider overturning other provisions.

Washington alcohol regulators may appeal the part of the ruling favoring Costco. “The state got a pretty good deal. It has to decide whether it can live with a regulatory scheme that sort of has one component plucked out and thrown away,” said Richard Blau, a lawyer who specializes in alcohol law with GrayRobinson, a Florida law firm. Regulators could leave it up to state lawmakers to address that aspect of the court’s decision.

The other reason that this so-called “regulatory architecture” was partly created, in addition to discouraging overconsumption, is to level the playing field among different sizes of businesses so that advantages were not given to larger businesses by virtue of their superior bargaining position and resources to make larger buys. That was the real reason Costco went after these laws, not because they were concerned that their customers might be paying too much for the beer and wine they sold. You’d have to be pretty blind to reality to swallow that one as their motivation, yet in mainstream media story after story that continues to be the reason stated.