Current Price: $11.11
Offer Price: $16.50
Expected Closing Date: 2020
Another transaction that involves a large cap buyer (no problems with financing) and used to trade very tightly until the recent market fall. It seems that increase of the spread has happened not because of the escalated risks, but rather due to the liquidity crunch and panic in the market.
Brewing giant ($67bn market cap) Anheuser-Busch is acquiring the remaining stake in craft brewing company Craft Brew Alliance for $16.50/share in cash ($320m in total). The buyer already holds a 31% stake in BREW. Shareholder approval has been received and the only remaining hurdle is antitrust approval. The size of the transaction implies that there should be no problem with antitrust, however in the beginning of February regulators have asked for additional information. It looks like the extension has been expected as the market has not reacted to this announcement by much. Overall, the management is confident in the eventual approval (Q3’19 conference call):
While this is a bigger than a breadbox deal, this will go through HSR review, we know that. It’s over the thresholds. That will all be standard. It isn’t terribly huge. I think it’s one of the challenges CBA and its stakeholders have always had. We’re bigger than a bread box, but we’re not much bigger than a bread box. So from that perspective, there’s nothing that I can signal to you that we think is egregious or anything that would be kind of a disproportionate concern for us as we enter into the transaction.
The review period will end April and the merger is expected to close this year (should close shortly after the regulatory blessing). In case the antitrust approval is not received, the parent will have to pay $15m termination fee (~5% of the total transaction value).
The buyer intends to finance the transaction through existing debt facilities.
Both companies have quite a close and long standing relationship (for about 25 years) and call this merger “an extension of partnership”. From the Q3’19 conference call:
A-B already distributes virtually all of our beer. They brew a good amount of our beer. They’ve got two seats on our Board. They have certain rights and involvement in the company. So from our standpoint, again, from a regulatory perspective, this is a very natural progression in the relationship. And so we don’t anticipate as a result of that, the fact that somebody would find this shocking or would find it to be a material change in kind of what’s happening.
Interestingly, the current merger already came at an opportunistic price. Under the master distribution agreement signed in 2016, Anheuser-Busch had an option to either acquire the remaining ownership in BREW at $24.50/share by August’19 or to pay a one time fee of $20m. The brewing giant chose the later, which as a result made the share price of BREW drop significantly. The current merger announcement was announced 2.5 months later.
So overall, it seems that the merger shouldn’t get cancelled.