Heineken Completes Lagunitas Buyout

Less than two years after purchasing a 50 percent stake in California and Chicago-based craft beer maker Lagunitas, Heineken International today announced it was coming back for the other half of the fast-growing U.S. craft brewery.

Specific financial terms of the deal were not disclosed, however the remaining 50 percent stake could be worth about $500 million, based on a previous valuation of the Lagunitas business.

In August 2015, when Heineken acquired its initial 50 percent stake in the brewery, sources familiar with craft beer transactions told the Santa Rosa Press Democrat, Lagunitas’ hometown paper, that the deal could be have valued the company at $1 billion.

In a press release, Heineken said Lagunitas founder Tony Magee would remain “active” as the executive chairman of the craft outfit and become Heineken’s director of global craft.

“Our partnership with Lagunitas has been a great success and today’s announcement marks the next stage of an exciting journey,” Heineken CEO Jean-François van Boxmeer said via the release. “We look forward to accelerating the roll-out of the Lagunitas brand to many more markets, and sharing Lagunitas craft beer with many more consumers around the world.”

Magee, 57, also praised the transaction, saying:

“During the 19 months of our partnership we have come to trust and truly believe in each other. Through that we have found ourselves aligned on how to bring the vibe of U.S. craft brewing to beer lovers everywhere. Only by fully committing to this relationship can we both respond to the historic opportunity that awaits us in all 24 time zones.”

In near 2,000-word blog entry on his personal Tumblr account, “Fermenting Ideas of Order,” Magee elaborated on the deal.

“Some who don’t fully understand it all may say it is selling out,” he wrote. “Truth is that we did then, and are now ‘buying in’… Money has value and equity has value too. I am using Lagunitas’ equity to buy deeper into an organization that will help us go farther more quickly than we could have on our own.”

At the Beer Marketer’s Insights seminar, held in New York City in November 2015, Magee said Heineken could eventually acquire the remaining 50 percent stake of Lagunitas that it didn’t already own.

“They have an option to buy a bit more of the company down the road,” he said at the time. “If I want to step aside, they would need to come in and buy more. They are not uncomfortable with this.”

In today’s Tumblr post, Magee, who claims to “wake and bake most days” and to put “Sriracha on everything,” hinted at some ambitious potential international expansion plans.

“They want us to be what we believe we can be, but they’d have to loan us the money to, say, build a brewery in the UK, but our own balance sheet can only carry so much leverage,” he wrote. “There were a dozen places along the road where we could move, but couldn’t. Hidebound by our own limitations, we were.”

According to Magee, “by going deeper into the heart of Heineken, we will be able to build a bridge from the vision for craft beer that Amsterdam shares with us and the OpCos [operating companies] who know their beer lovers and run their businesses to be closer to them.”

Lagunitas produced 910,000 barrels of beer last year, according to the Press Democrat, and expects to brew about 1 million barrels in 2017.

The Brewers Association recently ranked Lagunitas as the ninth-largest brewing company in the U.S. Founded in 1993, Lagunitas has expanded rapidly since 2008, when it produced just 57,420 barrels. In 2015, the company made more 624,000 barrels, according to the trade group.

Last June, Lagunitas announced a string of investments into three smaller breweries that were intended to help the company “expand” the way it participates in local markets. The company is also planning to build a brewery in Europe.

According to market research firm IRI Worldwide, off-premise sales of Lagunitas products in multi-outlet and convenience channels (MULC — which comprises grocery, drug, club, dollar, mass-merchandiser, Walmart and military stores) are up 13.6 percent year-to-date.

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