E-Malt.com News article: UK: BrewDog sells 22% stake to private equity house

Early investors in “punk” beer firm BrewDog will be able to bank a hefty profit this week. An injection of cash from a private equity house valued the company at £1 bln, 10 years after it began life in its co-founder’s mother’s garage, The Guardian reported on April 9.

San Francisco-based TSG Consumer Partners agreed to buy 22% of BrewDog, whose idiosyncratic beers and international network of bars have won it a cult following, in a deal worth £213 mln.

Some £100 mln will be invested in the business while TSG, which also owns US brewer Pabst, also spent £113 mln buying shares from existing investors, according to the Sunday Times.

Founders James Watt and Martin Dickie are understood to have made £100 mln between them as a result of the deal, a decade after they used a £20,000 bank loan to start brewing in Fraserburgh, Aberdeenshire.

BrewDog’s army of nearly 50,000 “Equity Punks”, its name for investors in four previous rounds of crowdfunding, will be able to sell up to 15% of their shares from this week, the company said.

Watt told investors that they stand make a return of 2,800% if they were among those who bought in at the first opportunity in 2010.

That fundraising effort valued the company at just £26 mln, but the brewer has grown rapidly since then by capitalising on the growing popularity of so-called “craft” beers, tending towards strong hop flavours and higher alcohol content.

It now employs 800 staff, is opening BrewDog bars across the world and has begun building a brewery in Columbus, Ohio, as a launchpad for a bid to conquer America.

TSG’s investment values the company, which posted a £7 mln pre-tax profit on £71 mln of revenues last year, at £1 bln. The valuation means that even late-stage investors who bought equity last year could make a 177% return if they choose to sell.

Shareholders cleared the way for the investment by approving changes to BrewDog’s capital structure at a meeting on 29 March, the company said, with 95% voting in favour. The changes include the award of preference shares to TSG, which confer the right to an annual return of 18% if the company is bought or lists on the stock market, according to reports.

“Ever since we first started this journey in Martin’s mum’s garage, BrewDog has existed to make other people as passionate about great craft beer as we are,” said Watt, adding: “We remain more laser focused on that goal than ever before.

“We’re not going to let the deal go to our heads, but Martin did buy himself a new jumper.”

The company also told its annual meeting that turnover rose 60% last year and predicted even better growth for 2017.

BrewDog’s decision to accept investment from a private equity group drew some comment in the light of its repeated efforts to cast itself in the role of a “punk” upstart skeptical of major corporations.

The brewer has also recently battled allegations of behaving just like the big businesses it claims to scorn, after the Guardian revealed that it threatened legal action against two small businesses it said were infringing its trademarks.

Dozens of punk rock bands recently signed an open letter questioning the firm’s right to use the term.

James Watt and Martin Dickie have said that they started brewing because “basically, we couldn’t find anything we really wanted to drink”. The pair, who were at school together in Aberdeenshire, started Brewdog in 2007 with the help of a bank loan, savings and a grant from the Prince’s Trust. Ten years later they are a household name, thanks to tie-ups with major retailers and a series of headline-making controversies.

It was Dickie who had the technical beer-making nous at the outset – he is a graduate of the International Centre for Brewing and Distilling at Heriot-Watt University in Edinburgh and spent two years working at a brewery in Derbyshire called Thornbridge. Meanwhile, Watt studied law and economics at the same university before a stint as a fisherman.

In their spare time they brewed and in 2006 they were advised to give up the day jobs by beer writer Michael Jackson. The next year, at the age of 24, they took on the lease of a building in Fraserburgh and invested in some equipment to launch their brand.

Dickie has told how in the beginning all they did was work: “Seven days a week and in the brewery – probably 18 to 20 hours a day. It was nothing but a lot of hard work and belief.”

After realising the power of publicity they responded to criticism of their stronger beers with the 1.1% ABV Nanny State, and produced another, The End of History, at a staggering 55% ABV, which was presented inside dead animals. In 2016 the Queen’s birthday honours list included MBEs for the pair.


10 April, 2017