Do you know what's better than beer? Cheaper beer.
Anheuser-Busch InBev SA
BUD, + 0.29%
the world's largest brewer, found a way to buy some well-known beer brands – including Kona Brewing Co. and Redhook Brewery – less than it could have just a few months ago, according to a Monday announcement. The producer of Budweiser and a number of other beers said it plans to buy the nearly 70% of Craft Brew Alliance Inc. it does not already own for $ 1
While this price is more than double that of Craft Brews
BREW, + 0.55%
closing price of $ 7.33, which is lower than the current stock price as of late July. Craft Brew shares pushed hard in August and September, after AB InBev decided not to buy the company at a previously agreed higher price.
In 2016, AB InBev and Craft Brew struck a long-term distribution and other partnership that included an alternative for AB InBev to buy Craft Brew at a rising price – $ 22 per share over a year, $ 23.50 per per share in year two and $ 24.50 per share in year three. At the end of three years, if AB InBev had not agreed to make the purchase, it agreed to pay Craft Brew $ 20 million.
Last summer, when the increase of White Claw overshadowed the value of beer wealth, AB InBev chose the latter option, forfeited over $ 20 million and anticipated the option to buy the company. After trading roughly between $ 12 and $ 21 per share since the deal was signed, Craft Brew shares fell below $ 8 during the two plus months since the acquisition failed.
This gave AB InBev – which has purchased a number of craft beer brands in recent years as it seeks to exploit the popularity of such breweries with discerning drinkers – a chance to buy at a discount, although it may not seem like a rating. solely by the closing price of the stock and the acquisition price. AB InBev already owned 31.2% of the Craft Brew Alliance, so it will pay about $ 221 million to a valuation of more than $ 320 million for the company if the deal goes through; even with the $ 20 million payment, it would save millions from what the 2016 agreement would have required it to pay.
AB InBev expects to buy the shares in cash as long as the agreement is approved by the other Craft Brew shareholders. The companies said they expect the deal to end next year.
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Craft Brew has focused on pushing Kona Brewing beer through the larger distribution and production footprint that its agreement with AB InBev could afford, and places the Hawaiian brewer's Longboard Lager and other grocery stores across USA. Other brands that belong to Portland, Ore., Collectively include Widmer Brothers, Redhook and Omission Brewing Co., which focus on gluten-free beers.
Kona is a scarce asset whose value is partially obscured by declines with Widmer and Red Hook brands, "wrote MKM Partners analyst Bill Kirk in a September note that initiated the company for a $ 16 purchase price target." We estimate that Kona alone is worth $ 350 million for shareholders, or ~ 80% up to today's share price, which implies unrealistically significant negative value for Widmer and Red Hook. "
Craft Brew shares jumped more than 120% in afternoon trading Monday, following the announcement, AB InBev's US shares were quiet in the extended session.