Heineken International to Purchase 50 Percent of Lagunitas

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Lagunitas Brewing, one of the fastest-growing craft breweries in the U.S., today announced it would enter into a joint venture with Heineken International, the world’s third largest beer company.

Financial terms of the transaction were not disclosed, but sources familiar with craft deals, according to the company’s hometown paper, the Santa Rosa Press Democrat, have said the blockbuster deal could value Lagunitas at $1 billion.

In a statement, Heineken said the new partnership – a 50-50 joint venture between Lagunitas and Heineken International, not Heineken’s U.S. division, Heineken USA (HUSA) – will give the global brewer a “unique opportunity to expand within the craft beer market.”

“Working together, Lagunitas will be able to bring its beer to new consumers and take the US Craft Beer movement to other parts of the world by tapping into Heineken’s global footprint,” a press statement read.

As part of the deal, Heineken will have three seats on the Lagunitas board. Lagunitas will also hold three seats and brewery founder Tony Magee will continue to serve as chairman, according to the Press Democrat.

The deal is expected to close in the fourth quarter.

“We are very excited to partner with Lagunitas,” said Jean-François van Boxmeer, the CEO of Heineken. “We recognize and respect the tremendous success of Tony and his team in building one of the great American Craft Beer brands. We look forward to that same team partnering with us to expand Lagunitas globally, so it can reach parts that other craft beer brands have not.”

In an entry to his personal Tumblr account, Magee described the transaction as “a crucial victory for American Craft Brewing.”

“What we have created in this relationship is a wide staircase to the sky for all of our people and for our brand as well as for the home-grown vibe of American Craft brewing,” he wrote.

So what does Magee like about Heineken?

“We met a company that saw and understood that we could only work together if we could continue as we are, steering our own ship here and abroad, being ourselves and exporting exactly that to communities all over the world, beginning with Mexico,” he wrote.

Culturally, too, Lagunitas and Heineken are a match in Magee’s eyes.

“We met people who thoroughly understood the revolutionary aspects of what beer-lovers have wrought in the America,” Magee wrote. “We met people who laughed easily along with us at our own history and our predilections. After all, they are from Amsterdam, if you get my drift.”

Going forward, Lagunitas said it will continue to “operate independently in the US, maintaining the integrity of its brews and culture.

“This is not the end of anything at all at Lagunitas, except maybe it is the end of the beginning, meaning that we are now standing at the threshold of an historic opportunity to export the excitement and vibe of American-born Craft Brewing and meet beer-lovers all over the Planet Earth, our true homeland,” he wrote.

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Lagunitas, founded in 1993, has expanded rapidly since 2008 when it produced just 57,420 barrels. In 2014, the company made more 600,000 barrels. It is currently on pace to produce more than 800,000 barrels.

In recent years, Lagunitas has embarked on major production expansion projects. Headquartered in Petaluma, Calif., Lagunitas borrowed $52 million to build its second brewing facility in Chicago last June. Earlier this summer, the company broke ground on a third brewery in Azusa, Calif.

Today’s announcement comes just one month after Reuters reported the company was exploring “strategic options, including the sale of an equity stake.”

Wells Fargo Securities, LLC acted as the exclusive financial advisor to Lagunitas and Sidley-Austin LLP and McNeil, Silveira, Rice & Wiley served as the company’s legal counsel.

Press releases with additional information from both companies are included below.

AMSTERDAM, The Netherlands and PETAFUKINLUMA, Calif. (Date) – HEINEKEN N.V (“HEINEKEN”), established in 1864 and now the leading brewer and marketer of premium beer and cider brands, and The Lagunitas Brewing Company (“Lagunitas”), based in Petaluma, California, today announced that they have entered into a powerful new partnership, which will allow Lagunitas to export the exciting vibe of American craft beer globally.

HEINEKEN and Lagunitas will form a joint venture and Lagunitas will continue to operate independently in the US, maintaining the integrity of its brews and culture. Tony Magee, founder of Lagunitas, will remain at the helm, with the same leadership and staff, same brewers, same recipes and same suppliers and distributors helping to drive the brand forward.

Both companies will benefit from the partnership. HEINEKEN provides Lagunitas with a global opportunity to present its beers to new consumers and Lagunitas provides HEINEKEN with the opportunity to build a strong foothold in the dynamic Craft Brewing category on a global scale, with the category growing in popularity almost everywhere now.

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“This venture will create a way for Lagunitas to help HEINEKEN’s global distribution network participate in the growing craft beer category in places from Tierra Del Fuego and Mongolia to the far-flung Isle of Langerhans,” Tony Magee, founder of Lagunitas, said. “Lagunitas will share in the best quality processes in the world and enjoy an open door to opportunities that took lifetimes to build. This alliance with the world’s most international brewer represents a profound victory for American craft. It will open doors that had previously been shut and bring the U.S. craft beer vibe to communities all over the world.”

Jean-François van Boxmeer, a lifelong beer aficionado and now CEO of HEINEKEN added: “We are very excited to partner with Lagunitas. We recognize and respect the tremendous success of Tony and his team in building one of the great American Craft Beer brands. We look forward to that same team partnering with us to expand Lagunitas globally, so it can reach parts that other craft beer brands have not.”

Lagunitas has breweries in Petaluma, California, and Chicago, Illinois, with a total capacity of 1.2 million barrels. A third brewery under construction is scheduled to open in Azusa, California, in 2017, which will help Lagunitas keep pace with current demand. HEINEKEN, on the other hand, has 180 of those buggers everywhere.

The partnership details have been agreed to and signed and is expected to close early in the 4th quarter.

Wells Fargo Securities, LLC is acting as exclusive financial advisor to Lagunitas and Sidley-Austin LLP and McNeil, Silveira, Rice & Wiley served as legal counsel.

About Lagunitas Brewing Company:

Lagunitas Brewing Company began on a kitchen stove in Northern California in 1993. From actually getting beers into bottles and onto the streets, Lagunitas looks to the future… From expanding the Petaluma Brewery to building a second in Chicago and soon a third in Azusa CA to bringing its flagship IPA across the pond Lagunitas could probably make good beer on the Moon. Wherever you go, beer speaks, people mumble. More mumblings at www.lagunitas.com.

About HEINEKEN:

HEINEKEN is the world’s most international brewer. It is the leading developer and marketer of premium beer and cider brands. Led by the Heineken® brand, the Group has a powerful portfolio of more than 250 international, regional, local and specialty beers and ciders. We are committed to innovation, long-term brand investment, disciplined sales execution and focused cost management. Through “Brewing a Better World”, sustainability is embedded in the business and delivers value for all stakeholders. HEINEKEN has a well-balanced geographic footprint with leadership positions in both developed and developing markets. We employ 81,000 people and operate more than 160 breweries in 70 countries. Heineken N.V. and Heineken Holding N.V. shares trade on the Euronext in Amsterdam. Prices for the ordinary shares may be accessed on Bloomberg under the symbols HEIA NA and HEIO NA and on Reuters under HEIN.AS and HEIO.AS. HEINEKEN has two sponsored level 1 American Depositary Receipt (ADR) programmes: Heineken N.V. (OTCQX: HEINY) and Heineken Holding N.V. (OTCQX: HKHHY). Most recent information is available on HEINEKEN’s website: www.theHEINEKENcompany.com and follow us via @HEINEKENCorp.

Amsterdam, 8 September 2015 – Heineken N.V. (‘HEINEKEN’) (EURONEXT: HEIA; OTCQX: HEINY) today has announced the acquisition of a 50% shareholding in the Lagunitas Brewing Company, the fifth largest craft brewer in the United States by volume. Lagunitas owns a stable of award-winning brands, including Lagunitas IPA. Lagunitas IPA is the largest India Pale Ale brand in the United States and has become a benchmark for the category. The transaction will provide HEINEKEN with the opportunity to build a strong foothold in the dynamic craft brewing category on a global scale, whilst it provides Lagunitas with a global opportunity to present its beers to new consumers in a category that is showing exciting international growth opportunities.

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Founded in California in 1993, Lagunitas is estimated to sell c. 1 million hectolitres of beer in 2015 from its two world-class breweries in Petaluma, California, and Chicago, Illinois. A third brewery is currently under construction in Azusa, California. The brewer has a strong track record of growth, with 2012 – 2014 revenue CAGR at 58%. Its other leading brands include A Little Sumpin’ Sumpin’, Daytime, Pils, Sucks, Hop Stoopid and Maximus. Lagunitas has a nationwide presence in the United States and the brewer has expanded into a number of other markets including the UK, Canada, Sweden and Japan, offering strong potential for continued growth outside the United States.

In the United States, craft beer continues to outperform the overall beer market, and now represents 11% of total volumes. Within the craft segment, IPA is the fastest growing category.

Lagunitas will continue to be led by Tony Magee, its founder and Executive Chairman, alongside the existing management team and the company will continue to operate as an independent entity.

The transaction is subject to customary closing conditions and is expected to complete in the 4th quarter of 2015. Financial terms are not disclosed.

Commenting, Jean-François van Boxmeer, Chairman of the Executive Board & CEO of HEINEKEN said:  “We are very excited to partner with Lagunitas. We recognise and respect the tremendous success of Tony and his team in building one of the great U.S. craft beer brands. We look forward to that same team partnering with us to expand Lagunitas globally, so it can reach parts of the world that other craft beer brands have not.”

Tony Magee, founder and Executive Chairman of Lagunitas, added: “This venture will create a way for Lagunitas to let HEINEKEN participate in the growing craft beer category across its global distribution network in places from Tierra Del Fuego and Mongolia to the far-flung Isle of Langerhans. Lagunitas will share in the best quality processes in the world and enjoy access to opportunities that took lifetimes to build. This alliance with the world’s most international brewer represents a profound victory for U.S. craft. It will open doors that had previously been shut and bring the U.S. craft beer vibe to communities all over the world.”

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