Founders Brewing Co. Announces Minority Partner, Mahou San Miguel

Whose beer are you drinking? I don't like Founders that much, but consistency is definitely something they've got going for them.

 

hell no, I read the title

 

Obviously, carry on.

 

A lot of money, might be slightly undervalued; last time i checked, founders sales are about 1/10 of SAM, whose market cap is 3.7 bil.

 

I'm wondering what Duvel Moortgat's next purchase will be. The Alchemist? New Glarus? Russian River?

 

Actually, here in the land 10,000 lakes, we've already had our first takeover, when Bent Brewstillery merged with Pour Decision.

 

I applaud the fact that they kept control and cashed in. They sold 1/3 of the company for ~100 million. I am sure some of that goes back in to the business, but they are rich men now. What can you buy with 300 million that you cannot with 100 million. I have faith that they will continue to maintain their standards. And now any bad batches can go to Spain.

 

Not a Founders follower, but of the beer I've had, they get mid-high to higher ratings consistently ... so as long as they hold true to their word. ” with continuity in their recipes, processes, facility and staff." I say good for them.

 

I think what they did is the most logical and crafty way to get a little coin for their hard work. The values on these craft breweries are so hard to ignore right now and I can't blame them. They, as announced, could have gone BMC route and lost control and face, gone private equity which would have flipped them in a few years, or gone ESOP which feels good but gives these breweries no long term succession plan. I read into it as San Miguel is into it primarily for the European distribution rights. Being from GR and having met the owners a bunch I'm happy for them. They get some money and still get to keep their brewery.

 

Goldman Sachs advised on that deal, right?

 

And Craft Brew Alliance's market cap is $255 million.

 

For what it's worth, we already see Founders pretty regularly in Denmark, I know Sweden gets a fair bit of distribution too... not entirely sure on the rest of Europe though.

 

This reminds me a lot of the Boulevard sale to Duvel Moortgat. Obviously a little different, in that Boulevard sold 100% to Duvel, compared to Founders only selling 30%, but there are a lot of similarities. The owners of Boulevard and Founders made the decision to sell to companies that were 1) family-owned and 2) international, providing them access to an existing distribution network which would be prohibitively expensive for them to set up on their own.

Speaking of the similarity to the Duvel/Boulevard transaction... your note makes me wonder how this will impact Founders status as a Craft Brewer. I mean, the BA has modified their definition in the past to ensure certain key players retained their Craft Brewer status (upping production limits, allowing non-"traditional" ingredients as long as they weren't the majority of a brewer's portfolio), so it will be interesting to me to see if they make changes yet again to allow Founders to remain a Craft Brewer.

I know that Duvel is considered a Craft Brewer, although on the BA Top 50 from 2013, it is listed as being based in Kansas City and Cooperstown, with no mention of the Belgian headquarters.

I think ultimately, what it says is that there is no single way to view these kinds of transactions. It's part of the reason why the Brewers Association continues to have trouble finding a consistent definition for Craft Brewer, because they are a trade group trying to represent a subset of the larger beer industry that cannot be simplified into hard lines based on barrel production quantity, ownership ratios and ingredients used. The idea of "craft" is much messier in practice.

 

You don't have a clue what you are talking about, try READING and UNDERSTANDING the article.

 

Founders is much smaller than that, based on 2013's barrelage figures for both companies:

Founders - 111,000 bbl. (Brewbound article)
Boston Beer Co. - 3,400,000 bbl. (BBC 2013 Annual Report - includes their beer, cider and FMB's)
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Even with their continued growth, Founders was on track to brew around 200k bbl. this year.

 

i don't know that much about Founder's but i remember seeing a mini documentary on them a while back and the whole thing was talking about how proud they were to be 100% family owned etc.. that's the only reason this strikes me as odd

 

I don't know how John Kimmich feels, but everything I know about Dan and Deb Carey and Vinnie and Natalie Cilurzo says that NG and RR are two breweries that will never sell out. Both have consistently shown aversion to expansion, yes, even despite New Glarus having a large capacity: they refuse to sell outside Wisconsin, still.

 

Founders maintains control of the company. Their goal is to increase production from around 200k barrels to 900k barrels through a large, and very expensive, expansion. Development loans of this type and size are tricky with banks and costly with investors. Why not tap into the equity that is the brand? And through a partnership with a family owned foreign brewery that can presumably help Founders grow internationally.

 

Mahou San Miguel seems to be a fairly small brewer by international standards. Comparing this deal to the ABI buyout of Goose Island is a little crazy. Founders needs money to grow its business and needs international partners if it wants to expand outside of the US. I think that they went about it the right way by partnering with a small family owned international brewer that seems to be Spain's version of Yeungling. I think we will see more and more of this kind of partnership, buyouts by the big guys or by the big craft guys and possibly some more alliances like CBI.

 

Never is a long time. Founders made the point in their statement that they have a number of older shareholders that were looking to cash out their highly profitable investments. You can't really have a problem with that. NG and RR could face similar issues down the line. These events happen to all businesses when there is a generational shift in ownership. We're just seeing the first examples in craft breweries since the industry really took off in the 90's. Uncle Joe and your roommate from college put up 10% of the starting funds 20 years ago. Now they want to have access to the appreciation. Either pay out of your own pocket, take out a loan to finance their buyout, or find an external buyer of their equity. These deals also allow the ongoing owners to strike an equity value and have a better sense of how to compensate people and/or sell/distribute equity to other employees. The deal itself isn't an issue. It's just a matter of finding the right buyer/partner, which is unknown at this point.