The Chicago Tribune reported this morning that Anheuser-Busch InBev, who five years ago bought Goose Island Brewing, the production facility and the brand — but not the brewpubs — has announced the purchase of the original brewpub on Chicago’s Clybourn. Founder “John Hall said AB InBev was unable to buy the brewpub under Illinois law at the time of the first sale, in 2011, but also didn’t have much interest. ‘They didn’t understand the value, which they do now,’ he said.” Neither the price or terms were revealed, but apparently “Goose Island’s Fulton Street brewery will become the parent company of the brewpub on Clybourn, which Hall started in 1988 after a career in the corrugated box industry.” In December, the Wrigleyville brewpub closed, meaning ABI will now owns the entire Goose Island kit and kaboodle.
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According to a new report in Business Insider, the new entity combining Anheuser-Busch InBev and SABMiller will control six out of the ten best-selling beers in America, and it would have been eight, except the deal currently stipulates that “Molson Coors will take Miller off of SABMiller’s hands.” But I especially like the handy flowchart they created to show the evolution of the various companies that will come together to become SABInBev, or whatever they end up calling the new beer behemoth. Sadly, it looks like SABMiller, or what’s left of it, will simply be absorbed into ABI.
While most of us were sleeping, it appears SABMiller and Anheuser-Busch InBev were quite busy, and announced this morning SABMiller and Anheuser-Busch InBev [Reach] Agreement in principle and extension of PUSU. The New York Times has an analysis of the deal, or you can read the entire Press Release from SABMiller:
LONDON–The Boards of AB InBev (Euronext: ABI) (NYSE: BUD) and SABMiller (LSE: SAB) (JSE: SAB) announce that they have reached agreement in principle on the key terms of a possible recommended offer to be made by AB InBev for the entire issued and to be issued share capital of SABMiller (the “Possible Offer”).
Terms of Possible Offer
Under the terms of the Possible Offer, SABMiller shareholders would be entitled to receive GBP 44.00 per share in cash, with a partial share alternative (“PSA”) available for approximately 41% of the SABMiller shares.
The all-cash offer represents a premium of approximately 50% to SABMiller’s closing share price of GBP 29.34 on 14 September 2015 (being the last business day prior to renewed speculation of an approach from AB InBev).
The PSA consists of 0.483969 unlisted shares and GBP 3.7788 in cash for each SABMiller share, equivalent to a value of GBP 39.03 per SABMiller share on 12 October 2015, representing a premium of approximately 33% to the closing SABMiller share price of GBP 29.34 as of 14 September 2015. Further details of the PSA are set out below.
In addition, under the Possible Offer, SABMiller shareholders would be entitled to any dividends declared or paid by SABMiller in the ordinary course in respect of any completed six-month period ended 30 September or 31 March prior to completion of the possible transaction, which shall not exceed USD 0.2825 per share for the period ended 30 September 2015 and a further USD 0.9375 per share for the period ended 31 March 2016 (totalling USD 1.22 per share) and shall not exceed an amount to be agreed between AB InBev and SABMiller in respect of periods thereafter (which shall be disclosed in any announcement of a firm intention to make an offer).
The Board of SABMiller has indicated to AB InBev that it would be prepared unanimously to recommend the all-cash offer of GBP 44.00 per SABMiller share to SABMiller shareholders, subject to their fiduciary duties and satisfactory resolution of the other terms and conditions of the Possible Offer.
Antitrust and reverse break fee
In connection with the Possible Offer, AB InBev would agree to a “best efforts” commitment to obtain any regulatory clearances required to proceed to closing of the transaction. In addition, AB InBev would agree to a reverse break fee of USD 3 billion payable to SABMiller in the event that the transaction fails to close as a result of the failure to obtain regulatory clearances or the approval of AB InBev shareholders.
The announcement of a formal transaction would be subject to the following matters:
- a) unanimous recommendation by the Board of SABMiller in respect of the all-cash offer, and the execution of irrevocable undertakings to vote in favour of the transaction from members of the SABMiller Board, in a form acceptable to AB InBev;
- b) the execution of irrevocable undertakings to vote in favour of the transaction and to elect for the PSA from SABMiller’s two major shareholders, Altria Group, Inc. and BevCo Ltd., in each case in respect of all of their shareholding and in a form acceptable to AB InBev and SABMiller;
- c) the execution of irrevocable undertakings to vote in favour of the transaction from AB InBev’s largest shareholders, the Stichting Anheuser-Busch InBev, EPS Participations SaRL and BRC SaRL in a form acceptable to AB InBev and SABMiller;
- d) satisfactory completion of customary due diligence; and
- e) final approval by the Board of AB InBev.
The Board of AB InBev fully supports the terms of this Possible Offer and expects (subject to the matters above) to give its formal approval immediately prior to announcement.
AB InBev reserves the right to waive in whole or in part any of the pre-conditions to making an offer set out in this announcement, other than c) above which will not be waived.
The conditions of the transaction will be customary for a combination of this nature, and will include approval by both companies’ shareholders and receipt of antitrust and regulatory approvals.
In view of the timetable for obtaining some of these approvals, AB InBev envisages proceeding by way of a pre-conditional scheme of arrangement in accordance with the Code.
The cash consideration under the transaction would be financed through a combination of AB InBev’s internal financial resources and new third party debt.
Further details of the PSA
The PSA comprises up to 326 million shares, which will be available for approximately 41% of the SABMiller shares. These shares would take the form of a separate class of AB InBev shares (the “Restricted Shares”), with the following characteristics:
- Unlisted and not admitted to trading on any stock exchange;
- Subject to a five-year lock-up from closing;
- Convertible into AB InBev ordinary shares on a one for one basis after the end of that five year period;
- Ranking equally with AB InBev ordinary shares with regards to dividends and voting rights; and
- Director nomination rights.
SABMiller shareholders who elect for the partial share alternative will receive 0.483969 Restricted Shares and GBP 3.7788 in cash for each SABMiller share.
Extension of the PUSU deadline
In accordance with Rule 2.6(a) of the Code, AB InBev was required, by not later than 5.00 pm on 14 October 2015, to either announce a firm intention to make an offer for SABMiller in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for SABMiller, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies.
In accordance with Rule 2.6(c) of the Code, the Board of SABMiller has requested that the Panel on Takeovers and Mergers (the “Panel”) extends the relevant deadline, as referred to above, to enable the parties to continue their talks regarding the Possible Offer. In the light of this request, an extension has been granted by the Panel and AB InBev must, by not later than 5.00 pm on 28 October 2015, either announce a firm intention to make an offer for SABMiller in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for SABMiller, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline will only be extended with the consent of the Panel in accordance with Rule 2.6(c) of the Code.
AB InBev reserves the following rights:
- a) to introduce other forms of consideration and/or to vary the composition of consideration;
- b) to implement the transaction through or together with a subsidiary of AB InBev or NewCo or a company which will become a subsidiary of AB InBev or NewCo;
- c) to make an offer (including the all-cash offer and PSA) for SABMiller at any time on less favourable terms:
(i) with the agreement or recommendation of the Board of SABMiller;
(ii) if a third party announces a firm intention to make an offer for SABMiller on less favourable terms; or
(iii) following the announcement by SABMiller of a whitewash transaction pursuant to the Code; and
- d) to reduce its offer (including the all-cash offer and PSA) by the amount of any dividend that is announced, declared, made or paid by SABMiller prior to completion, save for ordinary course dividends declared or paid prior to completion, which shall not exceed USD 0.2825 per share for the period ended 30 September 2015 and a further USD 0.9375 per share for the period ended 31 March 2016 (totalling USD 1.22 per share) and shall not exceed an amount to be agreed between AB InBev and SABMiller in respect of periods thereafter (which shall be disclosed in any announcement of a firm intention to make an offer).
The announcement does not constitute an offer or impose any obligation on AB InBev to make an offer, nor does it evidence a firm intention to make an offer within the meaning of the Code. There can be no certainty that a formal offer will be made.
A further announcement will be made when appropriate.
SABMiller released a statement this morning rejecting the latest takeover offer from Anheuser-Busch InBev. You may, or may not, be able to read the statements released by SABMiller on their website, and there are some fairly scary disclaimers including language that, depending on your jurisdiction, claims that the publicly available information may not be legal to read, and in such case advise you to “exit this web page.” Which while I’m sure is required by some law, probably UK law, also feels fairly ridiculous. At any rate, quite a few news outlets, such as the Wall Street Journal, Reuters and the New York Times are all reporting on it, so it must be okay for the likes of me.
The gist of it is the SABMiller board unanimously rejected ABI’s latest takeover offer, for the primary reason that they believe ABI’s offer “substantially” undervalues their company (currently the offer values SABMiller at $104 billion), among a few other technical reasons having to do with the timing, regulatory issues and others. The current offer is for roughly £65.14 billion, which is $99.76 billion dollars.
The Wall Street Journal helpfully created a graphic showing the recent history of the potential deal as it’s been unfolding.
There’s little doubt this is not the end of it, but there will continue to be a back and forth as this high-stakes game unfolds. And it really is a game, sad to say. Apparently negotiations have been tense, which really should not come as a shock to anybody, yet you see statements like this. “AB InBev is disappointed that the board of SABMiller has rejected both of these prior approaches without any meaningful engagement.” The absurdity of that reveals the gamesmanship involved, as it plays out in the media. It’s going to be an interesting few weeks.
This morning, Anheuser-Busch InBev announced they were acquiring Golden Road Brewing, located in Los Angeles. The Wall Street Journal confirmed “Terms of the deal weren’t disclosed,” and that the “acquisition is expected to close in the fourth quarter.”
From the press release:
“The energy and passion of the beer community is what drew me into this industry and with Golden Road we wanted to help develop the craft beer market in L.A.,” said Meg Gill, president and co-founder at Golden Road Brewing. “Our team worked hard to build Golden Road from the ground up and we are proud of the growth we’ve achieved in such a short time. California is an exciting and competitive market for beer and I see endless opportunities in partnering with Anheuser-Busch and their incredible distribution network to bring our beers to more people.”
As the largest craft brewery in Los Angeles County, Golden Road expects to sell approximately 45,000 barrels of beer in 2015 and can be found in more than 4,000 retail locations. With a brewery focused on draft and can production, a pub in Los Angeles and a new tasting room downtown. Additionally a new tasting room, opening in 2015, second production brewery and pub in Anaheim will be operational by the fourth quarter of 2016. Its core brands – Point the Way IPA, Wolf Among Weeds IPA, Golden Road Hefeweizen and 329 Days of Sun Lager – represent 95 percent of volume. Along with the core beers, Golden Road brewers are constantly experimenting with the freshest ingredients through a collection of rotating, seasonal and limited-edition brews, most notably the Custom IPA Series, a line-up of diverse, hop-forward IPAs.
“Golden Road’s commitment to making great beer, their pioneering spirit and the passionate beer culture built within the company is what appealed to us,” said Andy Goeler, CEO, Craft, Anheuser-Busch. “Their focus on giving back to the community and impact on the Los Angeles craft market in four short years makes Golden Road a strong addition to our craft portfolio.”
Golden Road Brewing will join Goose Island Beer Company, Blue Point Brewing, 10 Barrel Brewing and Elysian Brewing as part of Anheuser-Busch’s High End Business Unit’s portfolio. Anheuser-Busch’s partnership with Golden Road Brewing is expected to close by the end of the fourth quarter of 2015. Terms of the agreement were not disclosed.
Meg and me at the opening Gala for SF Beer Week in 2011.
And here, co-founder Meg Gill talks about the deal in a video.
Cervejaria Colorado was one of Brazil’s first small breweries when it opened in 1995. I met founder Marcello Carneiro in Argentina when I was there for beer judging in 2011. He’s one of the most fun-loving people I’ve ever met and I’ve since seen him in Brazil and also stateside a few times. He announced earlier today on Facebook that AmBev would be acquiring his brewery. Here’s the Google translation of the announcement:
Dear friends of the bear, we are very happy to formalize you that now the Colorado it becomes part of the group Ambev, along the breweries beer! In 1995, our founder, Marcelo Carneiro, started his journey in the country and put the breweries Colorado on the international market, solidifying a company that today bill around $18 million per year. 20 years ago we work with dignity and fight for the cause brewery, we gain strength and tread a path of large awards, authenticity and it will now be even better! We will continue to develop Brazilian genuinely revenue, our DNA. The Union of the brands will make it possible to increase the capacity of distribution of Colorado and, of course, to our dear Marcelo to devote even more to research of ingredients. Our commitment to the lovers of good beer is still strong and the dream that unites the two pubs is the recovery of the Brazilian beer, with ingredients Brazilians and produced for consumers from north to south of the country. Unite is to make this dream a reality, the dream of the Brazilian school of beer! A toast and hug from bear.
AmBev, you may recall, is the Companhia de Bebidas das Américas, a Brazilian brewing company, and the largest in Latin America and 5th worldwide. It was established by a merger of Brahma and Antarctica in 1999. After more business dealings, mergers and acquisitions, today is owned by Anheuser-Busch InBev. AmBev makes Antarctica, Brahma, Bohemia, and Skol, and in addition has a controlling interest in the popular Argentine brand Quilmes.
AmBev also released a statement, which I’ve used Google Translate to make more understandable as my Portuguese is worthless:
COLORADO NOW IS THE TIME OF THE BREWERY BOHEMIA
Breweries unite the passion for beer and the search for innovation
The dream of creating a Brazilian school of beer, based on the valuation of culture and national ingredients, joined our Brewery Bohemia Brewery and Colorado. The mark of São Paulo is now part of our team, bringing their tradition, quality, passion and daring.
“I am very excited about the opportunity to achieve my dream with Cervejaria Bohemia. When I founded the Colorado 20 years ago, always wanted to give a national touch to recipes and create a Brazilian school of beer, as there is the German and Belgian. I know that together we will make it happen, “says Marcelo Cerneiro, founder of Colorado.
Wakswaser Daniel, director of marketing for Cervejaria Bohemia, also celebrates the partnership: “It’s a time of celebration for the Brazilian culture. Our union allows further spread the knowledge brewing across the country. Consumers will have more choices, varied beers, unusual income and undisputed quality. ”
The Colorado follows with manufacturing in Ribeirão Preto, São Paulo. All labels will be maintained and the union with Bohemia Brewery will bring innovation to the portfolio. With the alliance, the distribution of power increases, enabling the brand to bring more beer enthusiasts throughout Brazil.
So it appears that the acquisition will merge Colorado with AmBev’s premium division headed by Cervejaria Bohemia, just as Wäls did in February, when AmBev bought them, as well. Also, in May, they acquired the Bogotá Beer Co., which is/was Colombia’s largest craft brewer.” So it appears there’s some long term plan for Latin America, just as we’re seeing here in the United States, too.
Marcelo’s also announced what his role will be going forward. “My job is international consultant, for a minimum of five years. My task will be to open new roads for Colorado, talk to business partners, represent the brand that I fought for 20 years. My fight has always been and will continue to facilitate the consolidation of a typically Brazilian brewing school, and it will never be abandoned.”
From the press release:
“For two decades, we’ve welcomed guests into our brewpubs and served them creative and impeccably crafted beers,” said Joe Bisacca, Elysian CEO and co-founder, who will continue with Elysian along with his partners, Dick Cantwell and David Buhler. “After a lot of hard work, we’ve grown from one Seattle brewpub to four pub locations and a production brewery. With the support of Anheuser-Busch, we will build on past successes and share our beers with more beer lovers moving forward.”
Dick Cantwell, Elysian co-founder and Head Brewer added, “Throughout our journey we’ve been focused on brewing a portfolio of both classic and groundbreaking beers and supporting innovation and camaraderie in the beer industry through collaboration and experimentation. By joining with Anheuser-Busch we’ll be able to take the next steps to bring that energy and commitment to a larger audience.”
Elysian sold more than 50,000 barrels of beer in 2014, with Immortal IPA accounting for more than a quarter of the company’s total volume.
“Elysian’s story includes everything we look for in a partner,” said Andy Goeler, CEO, Craft, Anheuser-Busch. “The team has spent their careers brewing distinctive beers in the thriving West Coast beer community and building unique venues that celebrate beer. As the fastest growing brewer in Washington, their recipe is working. Elysian’s brands are an important addition to our high-end beer portfolio, and we look forward to working together.”
In addition to the Seattle Airport Way brewery, the acquisition includes the company’s four Seattle brewpubs, Elysian Capitol Hill, Elysian Tangletown, Elysian Fields and Elysian BAR.
Anheuser-Busch’s purchase of Elysian is expected to close by the end of the first quarter of 2015. Terms of the agreement were not disclosed.
Not sure what to make of the news yet, all I know is what’s in the press release. So far, there’s been no statement from anyone at Elysian, though I suspect we’ll learn more throughout the day.
By now you’ve already seen the news that Anheuser-Busch InBev has taken another step closer to realizing their quest for world domination in the beer business. They’d already owned half of Mexican powerhouse brewer Grupo Modelo — makers of Corona, among other brands — but it was non-voting stock and they asserted very little control over them. In fact, Corona is often a competitor in the U.S., usually with non-Bud distributors. The irony, of course, is whether you bought Bud or Corona, eventually at least some of that money still made its way to ABI. The phrase “laughing all the way to the bank” springs to mind. Hard as it to believe, they already have a new website up even though the merger’s only been finalized in the last twenty-four hours. The name of the new site is Global Beer Leader. Does anybody else think that sounds ominously close to North Korea’s “dear leader?”
ABI is paying Grupo Model $20.1 billion to become ABIM, making it the second-biggest deal ever brokered in the beer world. The first was the $52 billion InBev paid to merge with Anheuser-Busch in 2008. The deal still needs government approval, and will likely be addressed and decided in the first quarter of next year.
According to the deal, Crown Imports — the current importer of Corona and other Grupo Modelo brands under the Constellation Brands umbrella — will continue to be the importer to the U.S. In fact, part of the deal includes the sale of the half of Crown Imports owned by Grupo Modelo to Constellation Brands, who had owned the other half, for $1.85 billion. That gives them 100% control over the distribution of the Modelo brands in America. ABIM head honcho Carlos Brito told Harry Schumacher this morning that they’re looking at this as a golden opportunity primarily to combine Bud and Corona outside the U.S. in the global beer market.
Adam Nason at Beer Pulse has a helpful chart showing that the merger gives ABIM control over 8 of the top 15 global beer brands, just over half.
Full details of the deal can be found at the new website Global Beer Leader.
Here’s a strange development. Remember Anheuser-Busch InBev filed trademark applications for over a dozen telephone area codes a few months ago. Speculation ran high that they were planning on duplicating the success of their recent acquisition, Goose Island Brewing, and their 312 Urban Wheat Ale, named after the local Chicago area code, but nobody could say for sure. This past Monday, the U.S. Patent and Trademark Office granted ABI a 6-month extension to submit their mandatory “Statement of Use” forms, meaning we’ll have to wait a bit longer to discover exactly how they’re planning on using those area codes.
Pro Brewer is now reporting — though the original sources are Evan Benn on St. Louis Today and Jenn Litz at Craft Business Daily — that ABI has spent over $12,000 filing similar applications to lock-up over 40 airport codes, including “LAX (Los Angeles), SFO (San Francisco), MIA (Miami), BOS (Boston) and LGA (New York LaGuardia).” Again, no word on what the plan is for them, but it would have to be for a beer name, wouldn’t it? What else could it be? Surely not just making sure no one else uses them? ‘Cause that would be kinda evil. What’s next, famous zip codes? Two-digit state codes? There was a great joke Lily Tomlin used to tell in her stand-up act. “I love it how New York City named their streets after all the famous numbers.”
Wow, there’s a lot going over at Anheuser-Busch InBev, and besides the slip in sales of their core brands. Last week, rumors abounded that ABI was planning to roll out some version of 100% Share of Mind, which had been the “unofficial” policy until a few years ago, when it became unworkable. I wrote about it four years ago as it started to wane in Losing Their Share of Mind, and you can get the history and background of the policy there, assuming you’re unfamiliar with it. In a nutshell, A-B insisted that their distributors focus ONLY on A-B and A-B-related brands, and there were ways they had for dealing with those distributors that didn’t toe the line. And it worked well enough while A-B brands were selling well, but when they began to slip, it became harder to enforce and harder for distributors to remain profitable without taking on non-A-B brands, especially craft brands.
According to Beer Business Daily, ABI “is again turning up the leverage with Sales Opportunity Teams starting next week.” Apparently “Sales Opportunity Teams” (SOT) is the new buzzword for it this time around. They continued:
The SOTs, which A-B chief Dave Peacock has repeatedly said are not punitive in nature, will certainly be uncomfortable for distributors with growing competing brands in the house, as they try to explain this or that competing display or tap handle on the floor.
It’s got to be even harder this time, with craft beer riding a wave, with great growth, higher rings and consequently more profits. Sell less, make more. Hard to walk away from that, but of course having the best-selling brands is also pretty attractive, too. So what’s a distributor to do?
Peacock was one of the few remaining high-level holdovers who had stayed with the company after it was acquired in 2008 by InBev. He was only one of two non-Busch family members to hold the title of CEO.
Peacock is well liked by wholesalers and is known as reasonable, fair and an advocate for the second tier. The latest pressure on wholesalers by InBevAB may certainly have prompted Peacocks departure.
Peacock began his career at A-B in 1992 and was promoted to president in 2008 in the wake of the acquisition after serving as VP-marketing since late 2007. Many U.S. executives departed after the InBev takeover, but Peacock was handpicked by the new owners to lead the U.S. operation.
Harry Schuhmacher, in his Beer Business Daily, broke the news this morning, calling it “a watershed moment in the history of A-B since its acquisition by InBev.”
Coincidence? Hard to imagine the two developments are completely unrelated, especially since Beer Business Daily, presumably working from a press release, states he’s leaving “to spend more time with his family and pursue other business interests.” I’m always more than a little suspicious when that’s the official reason for leaving, as it so often is in circumstances like this one.
Peacock is succeeded by Luiz Fernando Edmond, who until today was the Zone President of North America. Oh, and Bud Light Platinum is coming soon, in the cobalt blue bottle, and should be on store shelves as early as this week. They’re calling it a “game changer,” but I tend to think these other two developments will change the beer landscape far more than a Bud Light line extension.