No Deal: Anheuser-Busch Passes on Craft Brew Alliance
The Widmer Brewery was quiet yesterday afternoon.
Today nothing happened, and it was big news:
“Anheuser-Busch InBev declined an option to buy all of Widmer Brothers Brewing parent Craft Brew Alliance (CBA) on Friday…. As the price for opting out, AB InBev must pay $20 million to the Portland-based brewing consortium and to continue providing it with the global brewing giant’s network of production facilities and distribution networks.”
In a press release, CBA CEO Andy Thomas issued a statement reading in part that “while disappointing, with this decision made, management can turn its attention to refining strategic alternatives to maximize shareholder value.” It may raise an eyebrow to hear the “while disappointing” qualifier, but my sense is that Thomas has been steering CBA to this sale for years. The company’s “Kona plus” strategy was a proof-of-concept approach to illustrate the national potential of its flagship brand. Indeed in recent years, as it has snapped up small east coast breweries, developed a non-beer division, and streamlined properties, Craft Brew Alliance has even resembled the company it courted.
In the end, the financials may have doomed the deal. It was a particularly bad time for AB InBev to be spending money. Its recent acquisition of SABMiller has left it $100 billion in the red, and investors want less, not more debt:
Under pressure from Wall Street and credit ratings firms, AB InBev (BUD) has been forced to attack that mountain of debt by raising cash so it can repair the balance sheet. AB InBev has cut its dividend in half, unloaded its Australian business for $11.3 billion and explored an IPO for its Asia-Pacific division.
AB InBev's leverage — its debt to cash ratio — spiked after the $108 billion SABMiller deal closed in late 2016. By the end of that year, the company's net debt rose to about 5.5 times earnings before interest, taxes, depreciation and amortization, or EBITDA. That's more than double the company's pre-deal leverage and well above its target of two times EBITDA.
Moreover, CBA’s stock has continued to trend downward this year, falling below $12 a share this week—less than half the price A-B would have to pay in the qualifying offer. Ultimately, Anheuser-Busch decided to pay $20 million rather than a half a billion.
I was at an event at Coleman Farms a couple weeks ago and saw longtime CBA brewers Joe Casey and Doug Rehberg there. They were both neutral about the prospect of a buyout, but acknowledged that they just wanted the finality of a decision. I assume that it weighed heavily on the minds of folks down on Russell Street as the date approached.
I was personally nowhere near as sanguine about the prospect of a buyout. Having completed a biography of founders Kurt and Rob Widmer, I have grown attached to that big brewery—Oregon’s oldest. It may well have been good news for shareholders and executives at CBA, and possibly even the workers who survived the transition, but it wouldn’t have been good for Portland. Call the company what you will, but the physical space it occupies is the Widmer Brewery, a huge part of the state’s brewing legacy. Under AB InBev management that brewery and the Widmer brand would become line items on a sheet of thousands, overseen by someone in New York or Leuven—or who knows where. Certainly no place that cares about Portland’s brewing heritage. I’ll leave you with a few lines from that book, The Widmer Way (buy it today!), by way of describing why I’m happy no news was made today.
This doesn’t, however, capture the Widmers’ less tangible but perhaps more indelible legacy. They introduced one of the country’s most important ales, helping create the mold for what “American” beer should taste like. As founders of craft brewing, they own some part of the credit for changing the way Americans relate to beer. Had Kurt and Rob gone into banking or coffee instead, craft beer would still have flourished in the United States, but its character would have been different. Only a few breweries have had as much impact.
It’s not possible to imagine Portland without its rose gardens, its rivers and bridges, its shipyards or fir-covered parks or cloudy skies. And with each year that passes, it’s harder and harder to think of a Portland with- out Widmer Brothers. Rob and Kurt helped create craft beer in America, introduced a classic beer, and helped turn Portland into Beervana.
I’ll have a pint of Hefeweizen tonight (or three) and breathe a sigh of relief.