Australia: Coopers Brewery launches biggest share buyback in more than 10 years

The family-owned Coopers Brewery has launched its biggest share buyback in more than 10 years, with a price of A$375 per share that values the largest Australian brewer at more than A$436 million, The Australian reported on October 23.

Coopers has agreed to buy back shares from its investors a number of times over the last decade but the current offer, seeking to buy 8 per cent of the brewer, is its biggest since 2006. It is supported by record low interest rates that make corporate debt very cheap and a buyback an efficient use of capital.

In a document sent to Coopers shareholders, and obtained by The Australian, the brewer has also revealed to investors its latest unaudited accounts, which show the strains of a difficult trading environment for beer companies.

The unaudited accounts provided to Coopers investors show sales of A$253.6 mln for fiscal 2017, up slightly from A$245.9 mln in 2016. Coopers was forced to further impair its US home-brewing business, Mr Beer, to the tune of A$8 mln, on top of a A$7.5 mln impairment in 2016. Group net profit for 2017 was down slightly to A$34.95 mln, from A$35.67 mln in the prior year.

The latest buyback comes at a difficult time for brewers, including Coopers, with beer consumption at record lows, excise taxes placing pressure on profits, and drinkers being won over by other products such as cider, wine and spirits.

The price being offered to the roughly 150 shareholders in South Australia-based Coopers, most of whom are direct descendants of 19th century founder Thomas Cooper, is higher than a buyback price of A$357 set by the board in 2014.

Coopers is buying back 93,066 shares and once completed, the exercise will reduce Coopers’ total issued capital to 1.07 million shares.

At a market capitalisation of A$436 mln it is slightly more than the failed takeover bid by rival brewer Lion Nathan in 2005, which pitched an offer to the Coopers family of A$310 per share for a total bid value of A$420 mln.

Coopers chief executive and major shareholder Tim Cooper told The Australian there had been six buybacks since 2006, with the program allowing Coopers shareholders to cash in their shares.

“The only alternative strategy they have is to sell them to other shareholders through the pre-emptive scheme, which they are at liberty to do at any time. And they do it — every year we would have someone selling a small parcel — but from time to time larger shareholders have expressed an interest in selling larger parcels of shares.”

Coopers’ century-old constitution is unusual — some would say archaic. It limits share trading to within the family. The structure helped fend off Lion Nathan’s takeover bid in 2005.

Tightly held by the Cooper family, Coopers Brewery has four classes of shares that reflect the marriages and offspring of the company’s founder.

Mr Cooper had two wives, with the descendants from both awarded different classes of shares. Over the past few years Coopers shareholders have enjoyed average annual dividend payouts of about A$90,000 each.

Mr Cooper said the latest buyback was fully subscribed and Coopers Brewery would look to do another, possibly next year.

Turning to operations over 2017, Mr Cooper said the brewer had growth in beer volumes, with sales volumes up 2.9 per cent but profit down slightly as a result of a further writedown against Mr Beer’s goodwill and trademarks. He said this would be the last impairment for the US home brew business.

Mr Cooper said that in Australia, the “Coopers” brands were up 0.7 per cent, while its partner brands — foreign beer brands that it sells in Australia — were up a much stronger 25 per cent, led by a strong uplift in sales for Carlsberg beer which rose 24.8 per cent. Its newly launched Brooklyn Lager rose 35.3 per cent, albeit from a low base.

23 October, 2017