A potential buyer for troubled Canadian brewing equipment manufacturer Diversified Metal Engineering (DME) appears to have emerged.
In a January 18 report, Alvarez & Marsal, the receiver appointed in November after DME defaulted on loan payments to the Royal Bank of Canada (RBC), said it is negotiating with a potential buyer for the company’s primary business in Charlottetown, Prince Edward Island.
The potential buyer has not yet been named.
A request for comment with RBC was not returned as of press time.
According to court documents, RBC, which is DME’s only secured creditor, was owed more than $18 million (Canadian).
In addition to owing millions of dollar to various unsecured creditors, DME also failed to deliver expensive brewing equipment to brewery clients who had already paid millions of dollars in deposits. When it was first revealed that DME entered into receivership, the documents indicated that hundreds of employees were also owed unpaid wages.
Alvarez & Marsal said it received a total of 16 bids for DME’s Canadian operations, which are split into three business units:
- a Charlottetown headquarters, which employed about 150 workers;
- subsidiary Atlantic Systems Manufacturing (ASM), which employed 13 workers who primarily manufactured equipment for processing seafood;
- And a factory in Abbotsford, British Columbia, which employed 100 workers.
Three bids were made on DME’s Charlottetown operations, while four offers were made for its ASM operations. Meanwhile, nine bids were placed to either liquidate the Abbotsford plant or the entirety of DME’s assets.
After consulting with RBC, Alvarez & Marsal said it deemed one of the bids for DME’s Charlottetown operations “superior” to the other offers, due to “purchase price, closing risk, available financing and employment opportunities for retained and former employees.”
The receiver said it began exclusive negotiations with the bidder in early January in order to finalize an asset purchase agreement.
“The bidder is currently in the process of completing its final due diligence, prior to negotiating the terms of an asset purchase agreement,” the report said.
Alvarez & Marsal added that it would update the court on negotiations as they unfold.
In an email to one U.S. beer company that is owed brewing equipment, DME vice president of sales and marketing Marc De Jong wrote that the bidder plans to “take ownership and continue to operate the business as a going concern.” He added that the potential new owner’s goal is to “move forward with the DME projects currently on schedule.”
According to De Jong’s email, the bidder is “a strong reputable strategic party in the market,” and an asset purchase agreement is expected to be completed in about four weeks.
“We will do our utmost to rebuild the trust in DME and know that we want to continue to be the brand serving you in the future,” he wrote.
According to Alvarez & Marsal, following its appointment in November, about 50 workers continued completing orders at DME’s Charlottetown plant for customers that it “was able to reach satisfactory terms of sale.”
As for ASM, Alvarez & Marsal said it is in discussions with a bidder and the goal is to execute an asset purchase agreement.
Finally, pending court approval, Alvarez & Marsal said it would sell DME’s Abbotsford operations to Infinity Asset Solutions Inc. and Joiner Sales Corp., who plan to liquidate the business by March 31. A motion to approve the sale is slated to go before the court on January 25.
When DME’s financial woes began to unravel in late November, hundreds of of North American craft brewery owners who had paid millions of dollars in equipment deposits were left in limbo. The list of unsecured brewery creditors includes a number of well-known beer companies, including 10 Barrel Brewing, Anchorage Brewing, Diageo, Foam Brewers, Labatt, Lord Hobo, Maine Beer Company, Monday Night Brewing, Moosehead Breweries, New Belgium Brewing, Night Shift Brewing, Notch Brewing, Tired Hands Brewing, and Wicked Weed, among many others.
Some of those companies, such as Monday Night Brewing and New Belgium, were able to receive the majority of their equipment orders.
Monday Night CEO Jeff Heck told Brewbound that his company had ordered two 120-barrel fermenters, which shipped within 24 hours of the receivership announcement.
“Fortunately, [we] were able to get them delivered,” he wrote, via email.
As for New Belgium, the Fort Collins-headquartered craft brewery received “the bulk” of its brewing equipment order, which it had earmarked for a small-batch and sour brewery called “The Woods” located inside Denver’s The Source Hotel, spokesman Bryan Simpson told Brewbound.
Other beer companies, such as Texas’ Big Bend Brewing Company and Massachusetts’ Night Shift Brewing, haven’t been so lucky. Big Bend, which suspended operations at the end of 2018, is still waiting for its equipment. Meanwhile, Night Shift co-founder Rob Burns previously told Brewbound that his company was likely out “a large sum of money.”
Over the course of 27 years, DME built and installed brewing equipment for more than 1,600 customers in 70 countries. According to court documents, the company is valued at more than $70 million (Canadian).
In its report, Alvarez & Marsal said more than 90 percent of DME’s revenue came from the sale of brewing equipment to craft beer companies and brewpubs. The rest of the company’s revenue was derived from selling processing equipment to industries such as seafood and cannabis, among others.