Dogfish Head Sells 15 Percent Stake to LNK Partners

Discussion in 'Beer News & Releases' started by Todd, Sep 29, 2015.

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  1. Todd

    Todd Founder (6,140) Aug 23, 1996 California
    Staff Moderator Fest Crew Society

    Read more:

    Reply from @SamCalagione:
  2. gmoneyproductions

    gmoneyproductions Initiate (0) Aug 12, 2015 Colorado

    seems to be the trend here
    hope these private equity f@cks dont mess with the good beer....
    i would assume we will see many more of these deals in the next few years especially given that we just hit the 4000 brewery mark
    if Goldman Sachs gets their slimy vampire squid tentacles on any of my favorite brewers i am gonna be pissed.....
    Brolo75 and rronin like this.
  3. Thirstygoat

    Thirstygoat Defender (622) Nov 22, 2012 Illinois

    Get some money off the table and keep 85%; makes sense to me. If this is what it takes to have 90 Minute at the Hy-Vee
    six blocks from my house, a recent development, instead of three hours away I can deal.
  4. jlsims04

    jlsims04 Devotee (489) Jul 14, 2013 Illinois

    Good for Sam. Glad to see continued success.
    EchoesZ, RobH, Dan_K and 1 other person like this.
  5. Oceanbear1

    Oceanbear1 Initiate (124) Aug 8, 2013 Colorado

    It's only 15%. I'm cool with it, I hoe this means they can expand some more, like into Missouri!
    JLaw55, creepinjeeper and EchoesZ like this.

    WCKDVBZ Meyvn (1,034) May 9, 2014 South Carolina

    Uh huh! And he said that he'll never sell.
    Ranbot and SammyJaxxxx like this.
  7. mwa423

    mwa423 Initiate (0) Nov 7, 2007 Ohio

    What I find truly interesting with this deal is for private equity, what's the point here? They put down what I'm sure is a pretty fat stack of cash up front, have basically no input on the operation of the business and they're just hoping for healthy dividends which they don't control? I'm guessing the stake is relatively illiquid (that the other 85% owners have first right of refusal to sell) and require approval from the board to sell. So...why is this a good investment?
    5thOhio likes this.
  8. Himself

    Himself Initiate (177) May 20, 2014 Massachusetts

    1 vote on the board does not control the board in my opinion.
  9. bluehende

    bluehende Poo-Bah (2,428) Dec 10, 2010 Delaware

    The most interesting thing in the whole article is that it is to help with the oncoming competition with well capitalized companies.
    fureousangel and jstngjohnson like this.
  10. jlsims04

    jlsims04 Devotee (489) Jul 14, 2013 Illinois

    Its a very successful company. Im sure that the investment came with a share of the profits. Look at it like a silent partner. They provide capital for a constant return on their investment (as long as DFH continues to be profitable)
  11. mwa423

    mwa423 Initiate (0) Nov 7, 2007 Ohio

    Sure, it's currently a successful company, but it's easy for a successful company which is going to continue to expand to have negligible/no profits. Alternatively, it wouldn't be hard for the company to decide (this probably isn't the type of people Dogfish are, but it's an example) that Sam gets a bonus at the end of the year equal to 100% of net profits, no shareholder distribution. Obviously, we don't know the numbers here or the intricacies of the deal, but it just seems like this is a strange private equity play.
  12. jstngjohnson

    jstngjohnson Initiate (0) Dec 30, 2014 Virginia

    seems like the PE firm thinks of this as a solid ten year investment. Very little say on the board with a buy back plan already in place? Sounds like they like Sam's plan
    jongullotti likes this.
  13. jlsims04

    jlsims04 Devotee (489) Jul 14, 2013 Illinois

    Also a very real possibility. Its hard to judge the investment with no details.
    Ranbot and mwa423 like this.
  14. gmoneyproductions

    gmoneyproductions Initiate (0) Aug 12, 2015 Colorado

    i think its smart for the private equity firms in that this is a low risk albeit illiquid investment
    its a very successful brewery in a growing industry that has defensive characteristics and not at all tied to the sh!tshow of a stock market
    Ranbot and jlsims04 like this.
  15. Billolick

    Billolick Poo-Bah (8,009) Dec 20, 2003 New York

    PE is not evil...the goal is to make more money...both for DFH and for the investors...this is how capitalism have been using private investors and banks to help them make more $$$ for a long time....haters need to smell the coffee and grow up a wee bit about the realities of business and business competition....also Sam C is no dummy
  16. Joshjv

    Joshjv Initiate (0) Nov 12, 2013 Michigan

    Either A.) They do. Likely pretty soon after.
    Or B.) They don't. But they didn't before either.

    I believe that the percentage that follows along with what they say is pretty small..
  17. onespartan

    onespartan Aspirant (252) Nov 1, 2008 Michigan

    My guess is that the PE firm believes there will be some form of public offering in the future to cash out. Maybe they know more than the rest of us. Otherwise, as others have mentioned, a minority, illiquid stake in a private company seems odd and not congruent with the typical PE investment. For the most part, they are not 'buy and hold' investors happy with some annual profit-sharing. Just my two cents.

    Sounds like a good deal for Sam though and a nice way to take some money off the table while retaining control. Much in the same way that Founders did.
    the_trystero and mwa423 like this.
  18. Scott17Taylor

    Scott17Taylor Poo-Bah (1,778) Oct 28, 2013 Iowa
    Society Trader

    Awesome, hopefully they can expand into Iowa.
    NickTheGreat likes this.
  19. BeerGreg

    BeerGreg Disciple (366) May 17, 2013 Illinois

    I would agree with you. I rarely bought DFH before, so this news has no bearing on me. At the same time, I love Lagunitas, and will continue to purchase their beer, regardless of the "merger" (whatever it is) with Heineken.
    Pisthetaerus likes this.
  20. conoraugustine

    conoraugustine Initiate (0) Feb 17, 2015 North Carolina

    I'm more pissed off that this is becoming a trend rather than DFH's decision in general. But DFH is already huge so I don't see how this is necessary
    Brolo75 likes this.
  21. Joshjv

    Joshjv Initiate (0) Nov 12, 2013 Michigan

    They may be "huge." But do you know their financials? Do you know what expansion plans they are considering and what they will cost? Do you know how much cash they have on hand? If no to any of the above, then how do you know it isn't necessary??
  22. DovGibor

    DovGibor Initiate (154) Sep 18, 2015 New York

    The article quotes Sam saying he intends to buy the share back from LNK. It will be interesting to see if that happens, though we will likely have to watch for many years to find out.

    My understanding is that thus far Dogfish has relied on personal investments and bank loans. It could be those sources are tapped out and they need to fund a second brewery? Or perhaps this is cheaper than more bank loans? We will have to see what they do with the investment.
    #22 DovGibor, Sep 29, 2015
    Last edited: Sep 29, 2015
    ohiobeer29 and VincentFrey like this.
  23. Hesscabob

    Hesscabob Aspirant (225) Mar 16, 2014 Illinois

    How could this possibly convince someone to add their products to a "Do Not Buy" list? Sam and his team have successfully navigated the increasingly competitive craft beer scene for two decades. By giving up 15% of their company, temporarily to a very well managed private-equity firm that prides itself in sticking to minority equity positions they will gain decades of expertise to position themselves to grow exponentially. The $50M expansion that was financed through bank debt (Not giving up additional equity) is proof in itself that they are not selling out but rather intending on growing a bit faster than organically.
  24. NickTheGreat

    NickTheGreat Crusader (770) Oct 28, 2010 Iowa
    Society Trader

    Nothing to see here. A successful business being invested in. Happens every day
    riverlen, jstngjohnson, jrnyc and 5 others like this.
  25. Giantspace

    Giantspace Champion (818) Dec 22, 2011 Pennsylvania

    Who cares? If they make good beer I don't care who they sell a stake to. Biggest take away is that it sounds like in 10 years the whole thing will be sold and not a "family" business anymore. Guess Sam will retire in 10 years.

    If any of you were offered millions for a stake in your business I am pretty sure you would take the money. Stop all your bullshit chest pounding and saying you won't buy beer anymore from these brewers. It's the future and the present. Shit, I would sell out so quick and go back to my roots of a small fun brewing company rather than a huge corporation if I had the choice and so would most of you here.

    PA-Michigander and jcos like this.
  26. richobrien

    richobrien Devotee (470) Dec 29, 2013 California

    This could mean a lot of things. Given the smaller stake, Sam is likely using the infusion of cash to restructure/expand his business more quickly vs. a more organic approach.

    He seems to have a great handle on the industry and his business. I would expect this to be a real positive for DFH.
    VincentFrey and DovGibor like this.
  27. SamCalagione

    SamCalagione Initiate (123) Feb 22, 2004 Delaware

    Dogfish is not huge. I don't know the exact math but I guess we are somewhere around one tenth of one percent of the US beer industry. An industry of 4000 breweries where two international conglomerates control over 80 percent of our country's beer market. Something doesn't seem quite right about that to me. Which is a big part of the reason I believe in the Brewers Association definition of a craft brewery and why we are making the decisions we are making at Dogfish. I know not every beer lover shares this belief and that's cool - to each their own. IF there was only one opinion we would all be drinking one beer and that would suck. But a lot of us do believe in the Brewer's Association definition and there are a whole lot of small (not huge) breweries of different degrees of small (not huge) betting on this. Dogfish is still controlled by the Calagione family by a very healthy margin - one husband, one wife, two kids (a pretty small family, not huge). We're a Mom and Pop shop and we are proudly working alongside 230 amazing and talented co-workers making a lot of off-centered goodness. We intend to keep it this way at least until our kids are old enough that we know if one or both of them are willing and capable of keeping it going. I look forward to seeing a bunch of you at EBF. We are cooking up a really fun beer in a pretty unique old school package with the Brothers and Candice for this coming year.
    kbuzz, Lucular, chcfan and 91 others like this.
  28. Joshjv

    Joshjv Initiate (0) Nov 12, 2013 Michigan

    Thanks for chiming in here Sam!! I for one will continue to enjoy DFH beers when I can. Wishing you all the best going forward!! No matter what you choose to do or say, there will be people on BA that get all worked up about it...
  29. aasher

    aasher Poo-Bah (3,312) Jan 27, 2010 Indiana
    Society Trader

    This is one reason why I've always been a fan
  30. rikarmstrong

    rikarmstrong Initiate (87) May 14, 2015 Colorado

    I was a little shocked when I first read the headline, but when you read the article it's not that outrageous of a business deal.

    To me this seems like a play to get some capital to infuse into the company right away, with the idea of sustaining enough growth over the next decade so that Sam and Mariah can retire and leave DFH in good hands, and on a very solid foundation for the future.
    ChesBrewCo likes this.
  31. JackHorzempa

    JackHorzempa Poo-Bah (4,659) Dec 15, 2005 Pennsylvania

    Sam (@SamCalagione) is there a specific business reason for this 15% investment? For example, another brewery expansion?

    wpg1989 likes this.
  32. boisebeerguy85

    boisebeerguy85 Initiate (77) Oct 6, 2013 Idaho

    I have a feeling someone doesn't know how are business works and gets money.
  33. ShaneP

    ShaneP Initiate (125) Jan 26, 2013 Indiana
    Brewery Trader

    People should read the article and understand this is simply a way for DFH to fund their business. @SamCalagione states this very clearly in the article. If they had taken out a new bank loan it would not be news but its financing all the same when you are talking about 15% of the company.

    Building, running and growing a craft brewery at different levels of small is very expensive and capital intensive. Those doing it as a partner or family owned business are most likely growing their brewery with some kind of financing. We are only doing a few thousand barrels a year at Daredevil and we still have a few million in capital equipment invested so we can grow. Think about that when you consider DFH is at almost 200,000 barrels per year and is around 0.1% market share. It's a capital intensive business and this is a great example of a family owned business looking to grow responsibly and stay in control going forward.
    cjgiant, wspscott, ChesBrewCo and 2 others like this.
  34. inspektor

    inspektor Devotee (497) Jun 20, 2009 North Carolina

    Is there a precedence for this type of PE investment?
  35. coldy

    coldy Initiate (112) Sep 16, 2010 Delaware

    Geez....not much for capitalism. Heh?
    A lot of these comments really baffle me. We should all be celebrating...a regular guy like Sam Calagione starts making homebrew a couple decades ago and viola! He's now even wealthier and still doing what he loves!
    America is great..
    15% means they are not controlling anything...
  36. drtth

    drtth Poo-Bah (4,006) Nov 25, 2007 Pennsylvania

    mwa423 likes this.
  37. gmoneyproductions

    gmoneyproductions Initiate (0) Aug 12, 2015 Colorado

    as long as they dont mess with the beer
    i think its a good thing overall.....dont get me started on goldman sachs though:wink:
  38. Dirtyhands

    Dirtyhands Defender (657) Jul 3, 2014 Maryland

    Cool that Sam stepped in. Good for them.
  39. Strat58cat

    Strat58cat Initiate (99) Aug 29, 2015 California

    The American dream is to provide something that people need or desire, and become wealthy as a result. Some of us grind it out day-by-day, providing needed services of some kind such as legal, gathering capital gradually, compounding our family's wealth over time. Some people hit on Megamillions - not many. Some people - with skill, some luck, and a lot of hard work, create great-selling craft beers. Jim Koch hit a billion in stock in BBC recently, and 99% of it is his first beer from his grandfather's recipe, Boston Lager. Tony at Lagunitas reportedly sold 50% to Heineken for in the neighborhood of 1/2 billion, split between many early investors and founders. Now, Sam and others also are taking the opportunity to diversify their family's wealth by accepting equity investments.

    What's troubling is when some companies, like Goose and Elysian, sell out to Inbev. It's actually not A-B anymore at all. Inbev is totally different from the A-B that refused to gut Budweiser's traditional, slow lagering process in the early 1970s when Schlitz gutted their brew to cut costs. They're not the A-B run by the Busch family for generations, with every son being given a drop of Budweiser before their mother's milk, with their belief that Budweiser was like Coca Cola, with their ridiculous reverence and commitment to that very blah beer that kept them from destroying it. Inbev is a very aggressive cost-cutter. They buy, cut, buy, cut, buy, cut. Consumers choose other products after the cuts, market share drops, and so they buy again. Reports are that they already dropped the Busch family's standards for hops and rice. So of course it's a concern to Goose and Elysian fans. That's what Tony was saying: Heineken is no Inbev. That's certainly true. It's more like the original Busch family running things there. Dogfish Head selling out to Inbev would be a concern, but it didn't happen.

    This private equity investment should be of no concern to anyone, since it is 15%. Private equity is all about immediate profits, but even if they want to sell it to Inbev, they can't.

    If the Busch family could run Budweiser for more than 100 years, even though they didn't even have a special class of stock like the Fords to protect them, and even while the playboy Busch family heirs preserved Budweiser against the fad of cost-cutting that destroyed Schlitz, maybe Sam's family can hang in there, too. Sam's not that old. We should have plenty of good beer for years from Dogfish Head. I wish more craft brewers would follow the BBC approach of going public with two classes of stock, to protect the control of the founding family. Koch went to Harvard Business School - not as good as Columbia University, but not bad. Koch is no dummy. Koch can't get run out of BBC, like Inbev ran August Busch IV out of A-B.
    #39 Strat58cat, Sep 29, 2015
    Last edited: Sep 29, 2015
  40. ctylinebeer

    ctylinebeer Initiate (0) Jun 22, 2015 Pennsylvania

    He's intending on buying it back, so no worries
    Strat58cat and DovGibor like this.
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