A Hostile Past Makes Amiable Future Possible for Evans Brewing

EBC logo 2015

Bayhawk Ales, the oldest brewery in Orange County, Calif., is being rebranded as Evans Brewing Co.

This isn’t just any recalibration. This is the result of a lost proxy battle and the hostile takeover of a public company. But now, under the Evans name, the company, which is in some ways new and in some ways old, is finally looking towards the future.

Founded in 1994, Bayhawk had specialized primarily in brewing house brands for restaurants, rather than marketing its own products and labels. This obscurity made it hard for the company to capitalize on the burgeoning craft beer movement in its later days, leaving its approximate 1,200 shareholders, many aging or since deceased, without any returns on their initial investments in the company.

Evans Brewing, meanwhile, was a young brand in 2013 with some awards to its name. Launched in 2011 by the father-son duo Mike and Evan Rapport, the company had been contracting the bulk of its production to Mexico while promoting the brand as a California beer. The elder Rapport recalls things going well for a while, until the Orange County consumer base caught on that the local beer they’d been drinking was, in fact, brewed in Mexico.

“We just promoted it as Orange County-based,” says Rapport. “Everything was great until they found out where it was brewed and then it fell apart.”

So in 2013, Evans approached Bayhawk hoping to buy in as majority owner, and in turn solve the problems facing both companies.

The deal would have given Evans a production facility of its own, as Bayhawk had long operated out of a small brewery in Irvine, and Evans wanted to establish roots in the area. For Bayhawk, Evans’ leadership was offering its more recognizable name to their unknown brands, while also promising a financial return to the spurned shareholders who never saw their stocks traded on the open market, something that had been guaranteed at the onset of the company.

Its offers rebuffed, Evans Brewing initiated a hostile takeover, trading equity with shareholders as a means of taking control of the Board of Directors. In December of that year, shareholders voted to install a new Board, headed by the Rapports. The two companies subsequently entered an asset purchase and share exchange agreement that was finalized this past August, with the proposal winning 99 percent of the vote from independent shareholders (i.e. shares not held by Evans management).  

With this convoluted past in the rearview, the company is now strategizing for the days ahead.

Evans is currently in the process of trying to track down as many Bayhawk shareholders as possible to let them know they have until Dec. 2 of this year to submit their stock in exchange for shares of Evans Brewing — which they plan to have listed and traded soon on the U.S. stock market.

Though the two Rapports own 70 percent of the company, the older Rapport says their plan is to issue more stock — including a million shares for employees — and get diluted out. Not entirely though. Referencing Craft Brew Alliance as a model, Rapport, who now serves as chairman of the board, says he hopes to continue in the acquisition game.

“We want someone who sees value in their company but they can’t get value out of it,” he says. “On the economic side, not a lot of debt, or no debt. [They’re of] a certain size — got to be able to produce 12,000 to 15,000 barrels a year.”

More imminently, the company will be focused on growing its own brands.

Still operating out of the small production facility once occupied by Bayhawk, Evans is currently on pace to sell 7,500 barrels across six states in 2015. But that facility has little room to grow.

So it has also acquired a property in Fullerton where it plans to open a new brewpub called Evans Public House. Additionally, Evans is in the early stages of location hunting for a place to build another brewery, as it has plans to expand both production and distribution. Still, as it just now establishes its presence in the area, the company is hardly the new kid on that block.

“We’re now the oldest brewery in Orange County,” the elder Rapport adds.

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