M&A Update | Craft Beverage 2017

Baker Tilly Capital, LLC’s Craft beverage M&A Update provides an overview of the U.S. craft brewery and craft spirits distillery markets, as well as select transactions. Craft brewery market trends The number of craft breweries in the U.S. continues to grow, now at an all-time high of over 6,000 active breweries. Off- premise sales of craft beer grew an estimated 6 percent in 2017 and craft beer gained an estimated 0.5 percent share of overall off-premise beer sales in 2017. Large beer companies continued to lose ground as wine and craft spirits each gained an estimated 2.5 percent share of total off-premise alcohol sales. Canned beer is also on the rise as it grew from 17 percent of total craft beer sales in 2016 to 23 percent in 2017. Select brewery transactions are highlighted in the tables below. One interesting development in 2017 is the use of minority equity investments to create production and sales alliances between the companies to leverage each other’s resources geographically. Brooklyn Brewing sold a 24.5 percent interest in its company to Japan’s Kirin Brewery late last year and utilized some of the capital to purchase a minority interest in 21 st Amendment and Funkworks. This is a more risk-averse strategy compared to building additional facilities to generate growth. Also, while the large breweries have signaled to the market that they will be less acquisitive in the craft space, Anheuser-Busch InBev continues to invest in craft breweries through acquisitions via its ZX Ventures investment unit. ZX Ventures announced it acquired 4 Pines Brewery in Australia in September 2017.

Source: Brewers Association, Brewbound, public news sources, Baker Tilly Insights

Table 1: M&A activity with reported transaction value and multiple data – Breweries

Transaction Comps

Enterprise

EV

EV

EV

Date

Target Company

Transaction Overview

Acquiring Company

Value

Revenue CM EBITDA

Anchor Brewing Company, LLC

Sapporo Holdings Limited (TSE:2501) agreed to acquire Anchor Brewing Company from Anchor Brewers and Distillers, LLC for $85 million on August 3, 2017.

Sappro Holdings Limited (TSE:2501)

08/03/17

$85.0

2.6x

n/a

n/a

Charles Wells Ltd. Is the holding company of the Charles Wells Brewery and Pub Company based in the U.K. and founded in 1876. The brewing and brands sales interests, which includes ale brands Bombardier, Courage, and McEwan's as well as distribution rights, was sold to Marston's. Asahi Group entered into a binding agreement to acquire Anheuser-Busch InBev's Central and Eastern European beer production business located in the Czech Republic. China Resources Snow Breweries Limited produces, markets, and sells beer under the Snow Beer brand name in China. The company also offers various spirits, was founded in 1993, and is based in Beijing, China. Molson Coors entered into a difinitive agreement to acquire the remaining 58% joint- venture interest in MillerCoors from Miller Brewing Company for approximately $12 billion in cash. Molson Coors will also acquire full ownership of the Miller brand portfolio outside the U.S. and retain the rights to all the brands currently in the MillerCoors portfolio for the U.S. market, including Redd's and import brands. Anheuser-Busch entered into a definitive agreement (and subsequently completed the acquisition in October 2016) to acquire SAB Miller, which sources, brews, bottles, and distributes various beer. The company was founded in 1895 and is based in London, UK. Tibet Galaxy Science & Technology Development Co. produces and sells beer under the Lhasa brand in China. The company also offers liquor and other alcoholic drinks and is based in Lhasa, China.

Marston's PLC

$71.5

0.6x

n/a

9.2x

06/02/17

Charles Wells Limited

Central and Eastern Europe Beer Business from Anheuser-Busch InBev SA/NV (ENXTBR:ABI)

Asahi Group Holdings, Ltd. (TSE:2502)

12/13/16

$7,774.2

4.4x

n/a

14.8x

China Resources Beer (Holdings) Company Limited (SEHK:291)

China Resources Snow Breweries Limited

10/11/16

$3,265.3

0.7x

n/a

n/a

Molson Coors Brewing Company (NYSE:TAP)

11/11/15

MillerCoors LLC

$20,689.7

2.7x

8.8x

12.4x

SAB Miller plc (nka:SABMiller Limited)

Anheuser-Busch InBev SA/NV (ENXTRA:ABI)

11/11/15

$111,961.0

7.5x

13.5x 18.5x

Tibet Galaxy Science & Technology Development Co., Ltd. (SZSE:000752)

Tibet Tianyi Longxing Investment Co., Ltd.

07/16/16

$953.6

2.7x

11.1x 12.8x

Pivovarna Lasko produces and sells beer and malt in Slovenia and internationally. The company was founded in 1925 and is based in Lasko, Slovenia.

Heineken International B.V.

01/18/16

Pivovarna Lasko DD

$422.8

2.2x

n/a

14.5x

Mean

$18,152.9 $2,109.5

2.9x 11.1x 13.7x 2.6x 11.1x 13.6x

Median

Note: Contribution Margin (CM) is defined as Gross Profit less Advertising and Marketing Expenses Source: Capital IQ (February 26, 2018)

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