New Hampshire Entrepreneur Reaches Verbal Agreement to Acquire Smuttynose

How much is a distressed craft brewery worth in 2018? Somewhere north of $8.25 million, if the scene at New Hampshire’s Smuttynose Brewing earlier today is any indication.

An auction run by James R. St. Jean Auctioneers for Smuttynose ended with the company’s banker, Provident Bank, reclaiming the brewery for $8.25 million on Friday afternoon. Immediately after the auction concluded, Norman Rice, a local tech entrepreneur, approached the bank about purchasing the Portsmouth-based company.

Speaking to Brewbound, Rice said he had reached a verbal agreement with Provident Bank to acquire the Smuttynose assets for an undisclosed sum.

Here’s how things shook out:

Provident Bank had put Smuttynose’s Hampton-based production facility on Towle Farm and neighboring Hayseed Restaurant on the auction block with hopes of recouping at least $10 million. However, after initially failing to get a buyer at the $10 million asking price, auctioneer Jim St. Jean began the bidding process at $6 million. Things stalled at $8.1 million and, after consulting with Provident Bank president Chuck Withee, St. Jean said the bank would accept an offer of $8.25 million.

“Anybody?” St. Jean asked. “At eight two fifty, you’re going to own yourself a brewery. Anybody? Eight two fifty? Eight million two hundred and fifty thousand dollars. Anybody?”

But there were no takers.

Derek Durbin (left) and Norman Rice

So the bank took the brewery back for $8.25 million and began to field numerous offers from bidders following the conclusion of the auction. That’s when Rice, who serves as the chief marketing, development and product operations officer for Extreme Networks, reached a verbal agreement to purchase the brewery.

“We’ll be finalizing that shortly,” Rice told Brewbound. “This is more like a private sale now.”

“It appears things are heading in a positive direction,” added Derek Durbin, Rice’s attorney. “It still needs to be put in writing and signed, so until then, it’s not a done deal. But verbally speaking there’s an agreement that’s been reached in principle.”

In the meantime, Provident Bank will continue to field offers for the brewery, and it’s “business as usual” for Smuttynose, brewery spokesperson Barbara MacLeod told Brewbound.

Rice declined to share his offer for the brewery other than to say it was more than the $8.25 million the bank had offered the brewery for during the auction. He added that Smuttynose would be his “first direct” purchase in the beer space.

According to Rice’s bio on the Extreme Networks website, he previously worked in private equity as an operating partner with Marlin Equity, and as a managing director for the New Castle Capital group.

If Rice is successful in acquiring Smuttynose, he said the brand would live on.

“I love the brand,” he said. “We see a lot of potential in what we can do with this brand and the different assets that are a part of it. Smuttynose would continue — 100 percent.”

Rice added that he would be open to working with former owner Peter Egelston, who had previously offered to help a new buyer with the brewery’s transition.“We’re local folks,” Rice said. “We know the folks who work here, and we believe a lot in the brand and the technology and the platform that they put together. So we’re completely open to, and want to work with, and really frankly need to work with a lot of the folks not just in a transition — it’s going to be a smooth transition — but to really reinvigorate this brand. We have to get it back up and running and moving and producing assets as opposed to taking on water.”

The auction for the 24-year-old craft brewery was announced in mid-January. At the time, Egelston cited overleveraging of investments and missed growth projections due increasing competition from fellow craft brewers for the foreclosure.

Issues for the company apparently started following an investment to build a 32,000 sq. ft., LEED-certified gold facility with a capacity to produce 75,000 barrels. However, Smuttynose was only able to fill about 50 percent of that capacity. The company’s sales declined 8 percent in 2016 to 48,000 barrels, and the James R. St. Jean Auctioneers listing for brewery tabbed 2017’s production at 35,000 barrels.

Before the auction Egelston and partner, Joanne Francis, shared hugs with friends and employees as St. Jean read a letter that the couple penned.

“Despite the circumstances that led to today’s auction, we are proud of what we and our dedicated staff accomplished over the past 25 years and proud of what we built here,” they wrote.

Under towering steel tanks, Egelston and Francis, among a group of Smuttynose employees and supporters, watched the auction unfold. They embraced and shed tears.

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