Boston Beer Company and Dogfish Head Agree to Merge in $300 Million Deal
Eight years ago, Dogfish Head and Boston Beer Company teamed up to brew a collaboration beer for the annual SAVOR craft beer and food pairing experience.
Today, the two companies announced the signing of a definitive merger agreement valued at about $300 million.
The deal is expected to close in the second quarter.
As part of the transaction, Dogfish Head co-founders Sam and Mariah Calagione will receive about 406,000 shares of Boston Beer stock (NYSE: SAM), valued at $314.60 per share, making them the largest non-institutional shareholders in the company, behind Boston Beer founder Jim Koch.
Meanwhile, existing Dogfish Head shareholders will receive $173 million in cash, and Sam Calagione will obtain a seat on Boston Beer’s board of directors starting in 2020.
The merger comes nearly four years after Dogfish Head sold a 15 percent stake to LNK Partners, a New York-based private equity firm.
As a result of the merger, LNK will exit its investment in the Delaware-based craft brewery.
According to a press release, Boston Beer expects to fund the cash component of the transaction through a combination of cash on hand and its available credit line.
The merger brings together the Brewers Association’s second-largest craft beer maker, Boston Beer, with the 13th largest craft brewery, Dogfish Head. Both companies will retain their status as BA-defined independent craft breweries.
Speaking to Brewbound, Sam Calagione said the deal came together over pints this past February, during Beer Advocate’s Extreme Beer Fest in Boston.
“We talked about how challenging the industry is getting, the indie craft definition, brands that consumers think are indie craft, active lifestyle beers, and we discovered how beautifully complementary and not competitive our portfolios were,” he said.
In a press release, the two companies said the merger would “create a powerful Amercian-owned platform for craft beer and beyond.”
“This combination is the right fit as both Boston Beer and Dogfish Head have a passion for brewing and innovation, we share the same values and we will learn a lot from each other as we continue to invest in the high-end beer category,” Koch said, via the press release.
According to the release, Dogfish Head is on pace to sell 300,000 barrels of beer in 2019, with net sales of about $120 million.
Boston Beer chief executive Dave Burwick, who previously served as the CEO of Peet’s Coffee & Tea Inc. before taking over as CEO of the brewery last February, will lead the merged entity.
Meanwhile, George Pastrana will continue to serve as chief operating officer and president of Dogfish Head.
According to Calagione, Burwick — who led the acquisitions of two super-premium coffee brands, Intelligentsia and Stumptown, while at Peet’s — was “very involved” in the merger.
“United, we will have the highest quality, most distinct, high-end portfolio, from both a price-point and product perspective with the top-ranked sales organization to bring it to market,” Burwick said, via the release. “We expect that we’ll see more consolidation in the craft industry over time, and we’ll be in the best position to take advantage of those changes.”
Calagione, who noted that Dogfish shares about half of its wholesalers with Boston Beer, said the two companies would also look to “align distribution geography everywhere it makes sense.”
“Both of our companies sell 99 percent of what we make through the three-tier system,” he said. “It is a challenging moment where beer is not growing to the degree that all three tiers wish it was, and we can be great advocates to help bring beer back to growth in America.”
The two companies also do not plan on reducing their respective sales forces as a result of the merger.
“It’s going to work beautifully,” Calagione said, noting that Dogfish Head’s sales team is about 25 percent the size of Boston Beer’s.
Boston Beer also noted that it will consolidate Dogfish Head’s financial results into its earnings late in the second quarter. The company anticipates the transaction being “neutral to slightly accretive in 2019” and won’t have a material impact on its fully-year 2019 earnings per diluted share.
Prior to the announcement of the proposed merger, Boston Beer stock closed Thursday at $332.94, down 0.69 percent.