E-Malt.com News article: USA: Redhook Brewery buys Widmer Brothers Brewing to create one of the largest U.S. craft brewers

Redhook Ale Brewery of Woodinville has agreed to pay about $50 million in stock for Widmer Brothers Brewing in Portland, Seattle Times reported November 13. The new company, called Craft Brewers Alliance, will have management offices in both cities, the companies said in a joint press release this afternoon.

Both companies will keep their existing breweries, including Widmer's breweries in Portland and Redhook's in Woodinville and Portsmouth, N.H. They also plan to continue making their existing beers, including Redhook's ESB and Widmer's Hefeweizen.

With combined production of roughly 600,000 barrels a year, the new company will be one of the country's largest craft brewers.

The deal is expected to close in the first quarter, pending approval from regulators and Redhook's shareholders. It would trade under Redhook's ticker symbol, HOOK. Anheuser-Busch currently owns about a third of each company and will continue to own that much of the new corporation. Redhook plans to issue more than 8 million new shares to acquire Widmer Brothers, which is privately held. That would double the number of its shares outstanding, which will dilute the stock of Redhook shareholders but give them ownership of Widmer as well.

Redhook Chief Executive Paul Shipman said that as a major shareholder, he is not concerned about the dilution. "We will have a stronger company that's unified with seasoned management," he said.

Although Shipman, 54, will have the title of chairman emeritus at the new company, he will effectively retire when the deal closes. He will receive a severance package, the details of which are not yet public. He co-founded Redhook with Starbucks co-founder Gordon Bowker in 1981 after working for three years at Ste. Michelle Winery in Woodinville.

"I don't plan to stop working, but I don't plan to work in the beer business," Shipman said. "I haven't figured out what I'm going to do, but I have a penchant for alcoholic beverages."

He has guided Redhook through turbulent times, including many years without a profit. The company built two new breweries in the mid-1990s, shortly before a slew of craft brewers flooded the market. Last year, Redhook made its first annual profit in a decade.

Although rising hops and barley prices promise to create problems in the coming year, Shipman said he's optimistic.

"Everybody's going to raise prices," he said of the craft beer industry. "It's not going to be pain free... but this is the new golden age of craft beer. The people who drink our kind of beer love the products, which take such a tiny percentage of people's incomes in the U.S. that they barely notice it."

Kurt Widmer, who co-founded the Portland brewery with his brother Rob in 1984, will become the new company's chairman. Daily operations will be run by two chief executives: Dave Mickelson, who is currently Redhook's president and chief operating officer; and Terry Michaelson, president of Portland-based Craft Brands Alliance, a sales and marketing partnership between Redhook and Widmer Brothers that will dissolve when they become a single company.

Back in the late 1990s, Shipman said, he proposed a merger with Widmer Brothers but was turned away. Instead, the companies share sales and marketing in the Western U.S., and Redhook brews Widmer beers on the East Coast.

Because of the existing partnership, few headquarters job will be lost in the merger. Redhook will cut about six accounting jobs in Woodinville, Shipman said.

He expects the new company's size to allow it to expand more quickly in certain areas.

Redhook's New Hampshire brewery, for example, could make beer for Kona Brewing of Hawaii, in which Widmer has a minority stake. Widmer also owns a minority interest in Goose Island Beer of Chicago.

Exports are another possibility, Shipman said. Currently, Redhook exports beer to Japan in such small amounts that "you and I could drink that much," he said.

Shipman also thinks the new company will need a new brewery at some point.

"I think it's inevitable that we'll build another brewery, looking at the growth and the brands," he said.


14 November, 2007