The awkwardness between Craft Brew Alliance and Anheuser-Busch InBev didn’t end last Friday when the world’s largest beer manufacturer passed on making a qualifying offer to purchase the company.
A-B, which owns more than 31% of the Portland, Oregon-based craft beer company, had until August 23 to either make an offer of at least $24.50 per share to buy the remainder of the company or pay a one-time $20 million, opted for the latter.
CBA CEO Andy Thomas told Brewbound that the awkwardness has shifted from a will-they, won’t-they-get-married scenario, to one in which the question is if the two companies still want to live together now that they’re no longer engaged.
“There’s a different kind of tenor to the relationship now,” he said. “That’s not good or bad. That’s just what it is.”
Thomas described CBA and A-B’s “it’s complicated” relationship in terms of a break up. Sometimes couples who break up become better friends; other times, there’s no basis for a friendship.
“The question is what role do they play, and what role do they want to play,” he said. “Those are the conversations that we’re having in the future of CBA’s development.”
Answers to those questions are still unclear. Thomas said A-B didn’t offer an explanation for why it didn’t make an offer when the company informed him on August 22 that it wouldn’t be making an offer. He described the conversation as “cordial” and “amicable.”
“We didn’t get a lot of color in terms of what their decision criteria were, other than they concluded that they valued the partnership, they valued the brands, they valued the company, but they didn’t feel like they wanted to make a qualifying offer,” he said.
A-B Brewers Collective president Marcelo “Mika” Michaelis’ statement last week announcing it was passing on the option to buy CBA also didn’t offer much insight into the future of the partnership. Michaelis did call the relationship with CBA “extremely valuable,” adding that CBA is “a key complement” to A-B’s craft portfolio.
“We look forward to working together for many years to come,” he said.
A-B has declined to comment further on the relationship.
Thomas and the CBA team are continuing discussions with A-B in hopes of providing more clarity — to investors, at least — on the two companies’ future relationship during an off-cycle conference call with investors and analysts on Thursday, September 5, at 11 a.m. EST.
“Between now and next Thursday, we’ll be working to try to get a little more clarity from ABI, how they’re thinking,” he said, which will help CBA inform its own thinking on a future direction. “We’ll run it through our independent board members, the non-ABI board members, so that by the time we get to next Thursday, we can answer that question in terms of this is what we’re thinking about and these are the directions that we might want to run.”
What is clear is CBA, at its election for the next seven years, can continue leveraging a Master Distributor Agreement (MDA) to use A-B’s wholesaler network, a contract brewing arrangement for up to 300,000 barrels at A-B’s production breweries, and an export deal through A-B subsidiaries. Thomas said those agreements give CBA and its shareholders “a nice chess board.”
“We’ve got a lot of security for our brands, a lot of security for our shareholders,” he said.
What CBA — whose brands include Kona Brewing, Widmer Brothers, Redhook, Omission, Square Mile Cider, Wynwood Brewing, Cisco Brewers and Appalachian Mountain Brewery, as well as the pH Experiment — won’t be doing is making any “knee-jerk” moves, Thomas added. He said the company will continue to take a “thoughtful” and “grounded” posture. Nevertheless, CBA has begun exploring its options, which Thomas described earlier this month as an “infinite” number of possibilities.
“In the process of getting to work immediately, it doesn’t mean that you start to run in every direction but you start to contemplate in which direction you want to run,” he said.
As for the $20 million payment from A-B, chief financial and strategy officer Christine Perich said the company will use part of the windfall to help lower its debt level but is still exploring the best place to strategically invest the money.
“We haven’t determined that yet,” she said.