Sapporo Holdings to Purchase Anchor Brewing for $85 Million

Japan’s Sapporo Holdings Limited today announced that it would acquire iconic San Francisco craft beer maker, Anchor Brewing Company. The news was first reported by the San Francisco Chronicle.

The deal, financed through a combination of “own capital [and] external borrowings,” is worth $85 million, according to Sapporo’s second quarter financial statements. It is expected to close on August 31.

Under the terms of the agreement, Sapporo Holdings will acquire “all of the equity interest of Anchor Brewing Company,” which is controlled by a parent company “Anchor Brewers & Distillers.”

Anchor Distilling Company is not included in the deal.

Anchor Brewers & Distillers was formed in 2010 when former Skyy Spirits executives Keith Greggor and Tony Foglio purchased the brewery via the Griffin Group investment and consulting company from Fritz Maytag, who is widely regarded as one of the earliest pioneers of craft microbrewing.

The 121-year old Anchor Brewing Company, known for its Anchor Steam Beer, ranked as the 22nd largest domestic craft brewing company last year, according to industry trade organization the Brewers Association. The company produced 135,000 barrels of beer in 2016, but sales declined 4 percent versus the previous year.

In a press release announcing the purchase, Sapporo said Anchor’s annual sales totaled about $33 million in 2016. The $85 million deal represents about 2.5 times total sales and is significantly smaller than other recent California craft brewery purchases.

In 2015, Ballast Point sold to Constellation Brands for $1 billion. The San Diego-based company made about 277,000 barrels that year. Also in 2015, Heineken purchased a 50 percent stake in Petaluma-based Lagunitas Brewing Company, which made about 791,000 barrels that year. That deal was said to be worth $500 million, and Heineken has since acquired the remainder of the company.

Much of Anchor’s value lies in real estate, however. It owns the property where the brewery resides, as well as a building across the street, a source familiar with the company told Brewbound.

In an interview with the San Francisco Chronicle, Greggor said the deal had been in the works for a year, and the company held exploratory talks with several larger strategics about purchasing the brewery.

“When you take a brand like Anchor, its very soul exists in the heart of San Francisco,” Greggor told the outlet. “Of all the people we spoke to, (Sapporo) respected Anchor the most, what it stood for and the importance of its connection with San Francisco.”

Anchor will continue its brewing operations at its Potrero Hill production facility, and the company plans to open a new public taproom inside on De Haro Street, the Chronicle reported.

“Sapporo committed to investing in the Potrero Hill brewery until we exceed capacity of that brewery, but I have no idea when that would be,” Greggor told the outlet. “We are currently running at about 55 to 60 percent of that capacity.”

Plans for a second Anchor Brewing facility on San Francisco’s Pier 48 as part of the $1.6 billion Mission Rock Development project appear to have stalled completely after more than four years of delays, although the brewery wouldn’t comment, according to the Chronicle.

Anchor’s management told the Chronicle that selling complete ownership of Anchor to Sapporo — which was founded in 1876 and is Japan’s oldest beer brand — will strengthen the brewery’s long-term future and enable its continued international expansion. The brewery already exports beer to 20 countries.

In financial filings, Sapporo said the Anchor deal falls into its long-term management plan, “Speed 150,” which is aimed at building a portfolio of “highly unique” alcoholic beverage, food and soft drink brands from around the world. The company said it is prioritizing expanding its North American business.

“The addition of Anchor’s strong brand power and network to the Sapporo Group’s US beer business portfolio through the conclusion of this agreement is expected to generate further synergies and accelerate the growth of the Group’s US business,” the company said.

Sapporo previously acquired Canadian beer company Sleeman Breweries Ltd., which includes the Unibroue, Sleeman and Okanagan Spring brands, for $400 million in 2006.

Sapporo is the latest Japanese beer company to show interest in the U.S. market at a time when beer consumption in its home country are at an all-time low, according to Reuters. Last October, Kirin Holdings purchased a 24.5 percent stake in Brooklyn Brewery.

Press releases with more details are below.

Sapporo Holdings Limited to Acquire All of the Equity Interest of Anchor Brewing Company in the US

Sapporo Holdings Limited (hereinafter “Sapporo Holdings”) will acquire all of the equity interest of Anchor Brewing Company (California, US; hereinafter “Anchor”).

The Sapporo Group plans to further expand its US beer business by adding Anchor, a prominent beer manufacturer which produces the leading brand “Anchor Steam® Beer,” to its group.

Equity transfer agreement

Sapporo Holdings will enter into an equity transfer agreement with Anchor’s parent company Anchor Brewers and Distillers, LLC (hereinafter “ABD”). The transaction will be conducted through Sapporo Holdings’ subsidiary, to be established for the purpose of entering into the agreement. Sapporo will obtain all of ABD’s equity interest in Anchor which will join its group companies.

Execution date of agreement: August 3, 2017 (Thursday)

Equity transfer date: August 31, 2017 (Thursday)

Rationale behind Agreement

Last year, the Sapporo Group formulated the new Long-Term Management Vision “SPEED 150” through 2026, the year marking the Group’s 150th anniversary since its founding. The vision set forth in Speed 150 is for the Sapporo Group to be a company with highly unique brands in the fields of “Alcoholic Beverages,” “Food,” and “Soft Drinks” around the world.

Regarding its “Promote Global Business Expansion” policy, a key driver of its group growth strategy, Sapporo Group is pushing forward a distinctive plan that designates North America its business base and the rapidly growing “Southeast Asian” region as its highest-priority markets. In the US where the SAPPORO brand has maintained its position as the No. 1 Asian beer in the country over 30 years, the Group has been considering expanding its beer business through the acquisition of a new brand as well as further growing the SAPPORO brand.

Anchor is a prominent and historic US beer producer founded in 1896 in San Francisco. “Anchor Steam Beer,” its flagship brand, is said to be an icon that ignited the current craft beer boom in the US. Armed with its strong brand power primarily in San Francisco, where it is based, as well as other areas across the US, it has been enjoyed by countless beer lovers throughout the years.

The addition of Anchor’s strong brand power and network to the Sapporo Group’s US beer business portfolio through the conclusion of this agreement is expected to accelerate its speed of growth in the US.

About Anchor

Name: Anchor Brewing Company, LLC (beer manufacturing and sales)

Location: 1705 Mariposa Street, San Francisco, California, USA

Year founded: 1896

Representative: CEO Matt Davenport

Num. of employees: 160 (as of December 2016)

Production plant: One plant (San Francisco, California state)

Sales volume: Approx. 1.75 million cases (equivalent to 355ml × 24 bottles in 2016)

Annual sales: Approx. 33 million U.S. dollars (about ¥3.7 billion in fiscal 12/2016)

(Note 1) Sapporo Holdings acquired Anchor Brewing Company’s “equity” instead of its shares due to the fact that the latter is a limited liability company.

Sapporo Holdings Limited Acquires Anchor Brewing Company

San Francisco, CA (August 3, 2017) – Anchor Brewing Company announces that Sapporo Holdings Limited will be acquiring the company with plans to continue Anchor’s traditions and legacy in San Francisco while growing the brand globally. Anchor Brewing Company’s flagship beer, Anchor Steam® Beer, has been brewed in San Francisco since 1896. Sapporo has a long-standing history in Japan dating back to 1876 and an appreciation for tradition, craftsmanship and provenance which are all fundamental tenets of Anchor.

“Sapporo shares our values and appreciates our unique, time-honored approach to brewing,” said Keith Greggor, Anchor Brewing Co-Owner. “With both a long-term vision and the resources to realize it, Sapporo will keep brewing Anchor’s beers in San Francisco while expanding to new markets worldwide.”

“Anchor Steam Beer is a San Francisco original, inspiring a new generation of brewers and beer lovers around the world,” said Masaki Oga, President and Representative Director, Sapporo Holdings LTD. “Both companies share a brewing philosophy backed by long histories and this transaction enables both Sapporo Group’s US business and Anchor Brewing Company’s global business to make a further leap forward.”

More than 50 years ago, Anchor started the modern craft beer movement with a series of innovations. Anchor brewed the first post-prohibition Porter, ignited todays IPA boom when it introduced dry-hopping and the cascade hop and created the industry’s first seasonal beers. Since then, the emergence of thousands of craft breweries within the United States and around the world has created the need for scale and synergies to compete in a growing global market for craft beer.

Anchor’s experienced management team will continue to run the business but now benefit from superior financing and additional resources. Sapporo is committed to preserving and maintaining Anchor’s operations in San Francisco, including the historic Potrero Hill brewery. Sapporo will invest in the brewery to improve production efficiencies and will strengthen all aspects of management and production to ensure the highest quality of beer is consistently delivered. In addition, Sapporo is fully supportive of Anchor’s new public taproom concept that will be opening soon. Sapporo will also export Anchor to new international markets using its global distribution resources.

The transaction is expected to close on August 31st; subject to customary closing conditions. Terms are not disclosed. Anchor Distilling Company is not part of this transaction and will now become a fully independent company in its own right.

Sapporo first made its way to America in 1964. In 1984, SAPPORO U.S.A., INC. was founded to help preserve our high standard of quality throughout the country. Today, Sapporo stands alone as the best-selling Asian Beer in the United States for more than 30 years.

To learn more about Sapporo Holdings, visit www.sapporoholdings.jp/english/.

For more information on Anchor Brewing Company, visit www.AnchorBrewing.com or follow @anchorbrewing on social media.

About Anchor Brewing Company

Anchor Brewing Company’s roots date back to the California Gold Rush, making it one of America’s oldest breweries. Its Anchor Steam® Beer is San Francisco’s original since 1896. In 1965, Fritz Maytag acquired and revived the struggling brewery at a time when mass production of beer dominated and seemed unstoppable. Maytag started a revolution in beer that originated today’s craft beer movement. An undisputed icon, Anchor is America’s first craft brewery where beers are handmade in our traditional copper brewhouse from an all-malt mash. At Anchor, we practice the time-honored art of classical brewing, employing state-of-the-art methods to ensure that our beers are always pure and fresh. We know of no brewery in the world that matches our efforts to combine traditional, natural brewing with such carefully applied, modern methods of sanitation, finishing, packaging and transporting. To learn more visit www.anchorbrewing.com.

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