Private Equity Briefcase
February 24, 2009
Beer, Anyone?
The summer baseball season hasn’t arrived yet, but that doesn’t mean an ice-cold beer still doesn’t have plenty of appeal in the meantime. Satiating the thirst for beer, it turns out, can be a pretty compelling proposition at just about any time of the year.
It’s consumers’ unmitigated taste for malted brews that seems to be behind KPS Capital Partners' new deal and formation of its new platform company named North American Breweries, which acquired Labatt USA from Anheuser-Busch InBev and High Falls Brewing Co. for undisclosed terms. The purchase of High Falls gives the New York private equity firm control of the maker of the Genesse and Dundee beer brands, as well as the Costa Rican beer Imperial. With High Falls and Labatt USA under its belt, no pun intended, the newly-formed company certainly looks to be off to a robust start to its growth strategy of acquiring different beer brands.
The deal comes at a time when companies that have historically been the targets of traditional buyouts, such as manufacturers, have been hard hit from the recession. Hence, these companies are less attractive and, thus, it only stands to reason that financial buyers will gravitate towards businesses with recession-resistant qualities, whether beer sales are going through the roof or declining as they are at larger brewers, and growth potential.
Of course, it would be a little off to suggest that the Genesee and Dundee's Honey Brown brands are taking the beer world by storm. But, the acquisitions could turn out to give the buyer more than just a collection of various brands that undoubtedly appeal to different drinker; they could yield KPS’ next big home run.
As one middle-market investment banker who’s worked on M&A beer deals told this reporter about the KPS acquisition: “Flat at the right price is fine.”
Moreover, KPS has picked up a bottling company as part of its purchase of High Falls. Because a bottling company has hard assets in the form of machinery it offers collateral should the buyer need to secure credit which, let’s face it, isn’t the easiest thing to come by in today’s market. Additionally, the brewer has the facilities necessary to potentially launch new beers that may appeal to today’s more finicky beer drinker than perhaps its existing brews.
Only time will tell whether the new beer company proves to a winner for KPS the way Budweiser performed in Canada for Anheuser-Busch. Yet, what is for sure is baseball season is coming and cold beer will be sold.
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