CBA to Divest of Kona Brewing’s Hawaii Operations in Effort to Clear Regulatory Hurdles for A-B Merger

Craft Brew Alliance announced today plans to divest of its Kona Brewing operations in Hawaii in an effort to gain regulatory approval for its planned merger with Anheuser-Busch InBev.

Contingent upon CBA’s combination with A-B closing later this year, Kona’s operations in Hawaii — including its brewpubs in Kailua-Kona and Honolulu, as well as its under-construction 30,000 sq. ft., 100,000-barrel brewery — would be sold to PV Brewing Partners, a partnership between former A-B president Dave Peacock and Overland Park, Kansas-based family office VantEdge Partners.

The rights to the Kona brand in the other 49 states and international markets would go to A-B in the CBA deal. The world’s largest beer manufacturer would manage the Kona brand, its brewing, production, innovation and distribution outside of Hawaii.

“We are committed to working with regulators and facilitating the successful review and close of our expanded partnership with A-B,” Andy Thomas, CEO of CBA, said in a press release. “We are delighted to have found a strong buyer that will continue to nurture the spirit of the Kona brand in Hawaii and offer its employees, who will remain part of Kona’s Hawaii operations, further opportunities for growth and development.”

Marcelo “Mika” Michaelis, president of A-B’s Brewers Collective, added in the release: “While our shared vision for the expanded partnership between CBA and A-B did include CBA’s Hawaii operations, we are still optimistic about the ability of CBA and A-B to offer more consumers, in more communities, even more choices as a result of this expanded partnership. We are confident that PV Brewing will continue investing and driving economic growth in Kona’s communities in Hawaii.”

A-B agreed to purchase the remaining shares in CBA for $16.50 per share in November 2019. In early February, the U.S. Department of Justice requested additional information about the merger. A-B and CBA expect their combination to receive approval by the end of 2020.

VantEdge Partners is led by Paul Edgerley and Terry Matlack. Their investment portfolio includes a stake in the Kansas City Royals, as well as 260 quick-serve restaurants, including Dunkin’, Taco Bell and Jamba Juice.

According to VantEdge’s website, the firm’s investment focus is to make initial equity investments between $20 million and $75 million or invest that much as a company grows. The transaction price is expected to be disclosed in an 8K filing.

PV Brewing marks Peacock’s return to the brewing industry as an investor. Peacock, who served as president of A-B from November 2008 through February 2012 and worked for the brewing giant for more than a decade, is the chairman of VantEdge subsidiary Vitaligent, the largest Jamba Juice franchisee. Peacock is also an advisory board member for the Schnuck Markets grocery chain, which operates 112 stores in the midwest.

“In the same way that CBA carried on the legacy of what Cameron Healy and Spoon Khalsa built at Kona, our number one priority is supporting Kona’s future on the Islands and ensuring the success of the brand there,” Peacock said in the release. “We are energized by this unique opportunity and are proud to support the continued growth of Kona in Hawaii with a new state-of-the-art brewery.”

Speaking with Brewbound, Thomas said the proposed deal has a two-fold outcome, facilitating the overall merger of CBA and A-B and then putting Kona in its home market in the hands of people who will “nurture the brand” and invest in it locally.

Thomas noted that a deal like this is not new in the brewing industry, citing the import brands such as Labatt (sold in the U.S. by FIFCO USA but owned globally by A-B), Modelo and Corona (sold in the U.S. by Constellation Brands by owned globally by A-B), and even CBA’s ownership of the Cisco Brewers brand everywhere but on Nantucket island in Massachusetts.

“We believe there’s aligned interest in working together to build the brand that’s good for Hawaii and good for outside of Hawaii,” Thomas explained. “So they’ll have full autonomy in Hawaii. They’ll be able to innovate. They’ll be able to create new local brands and new local beers that are appropriate to the market there. And if we’re so inclined, we might take those brands and do something with them elsewhere, and vice versa.

“We’ll continue to build and nurture the brand on the mainland and international markets, and they can choose to use some of that locally, if they want to, but they will not be required to. And there will be a set of agreed upon brand guidelines that will act as guardrails for how the brand is treated in his home market in Hawaii.”

Thomas told Brewbound that CBA discussed a potential sale of Kona’s Hawaii operations with several parties but was most intrigued by the interest from PV Brewing.

“When they kind of became part of the process we got really excited given Dave’s background, his understanding of beer, his understanding of the industry and VantEdge’s wherewithal to invest in consumer goods to understand the value of building brands locally,” Thomas said.

Upon completion of the deal, PV Brewing will employ Kona’s staff in Hawaii, including general manager Billy Smith, who will continue to lead the brewery’s operations. Additionally, PV Brewing will enter into a distribution agreement with A-B’s whole owned distributor in Hawaii.

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