USA: AB InBev passes on option to acquire full control of Craft Brew Alliance

Anheuser-Busch InBev has passed on its longstanding option to acquire full control of US craft beer partner Craft Brew Alliance.

The global brewer confirmed on August 23 it will not make an offer to buy the shares it does not already own in CBA. An option for AB InBev to buy the shares runs out on August 23, with the group agreeing instead to make a one-off US$20m payment to the craft collective.

AB InBev owns a 31.3% stake in CBA, a craft beer group comprising breweries including Kona Brewing, Redhook Ale Brewery and Widmer Brothers Brewery. In October last year, the group acquired Appalachian Mountain Brewery, Cisco Brewers and Wynwood Brewing Co. AB InBev's option to buy CBA formed part of a 2016 agreement strengthening the relationship between the two companies.

Mika Michaelis, president of AB InBev's US craft beer unit, the Brewers Collective, said: "The long-standing and strong partnership we have with CBA is extremely valuable to Anheuser-Busch. While we are not making an offer to purchase the remaining shares of CBA, our existing commercial partnership with CBA continues to be a key complement to our industry-leading craft portfolio and we look forward to working together for many years to come."

In a subsequent statement, CBA's CEO, Andy Thomas, added: "While disappointing, with this decision made, management can turn its attention to refining strategic alternatives to maximize shareholder value. Over the past several years, we have built a sustainable infrastructure, optimised our footprint, and amassed a diversified portfolio of brands to support future profitable growth anchored by robust growth in the Kona brand and the addition of our three newly-acquired brands.

"Looking to the future, we are optimistic that our healthy balance sheet, bolstered by the $20m payment, and strategic investments in innovation and increased brand awareness will enable us to deliver long-term shareholder value."

Earlier this year, a shareholder in CBA called for the US brewer to seek a sale to AB InBev because it would be difficult to find a buyer that would offer more money. Midwood Capital Management, which said it is the eighth-largest stakeholder in CBA with a 2% holding, cautioned that if a sale to AB InBev did not happen then CBA should "immediately announce a strategic alternatives process with a plan to sell the company".

Commenting on the option pass, Cowen & Co beverage analyst Vivien Azer said that gaining approval for a CBA purchase was perhaps a "more onerous endeavor than A-B InBev cares to undertake". Azer highlighted the Budweiser brewer's "multiple headwinds", including the debt from its SABMiller purchase, challenges for in the US for Bud Light and Budweiser and the recently shelved IPO for its Asia-Pacific business.

Speaking after meeting with CBA management, Azer said potential uses for the $20 mln payment from AB InBev include debt paydown, incremental investment spend behind Kona or "new innovation beyond beer". The analyst said that alongside CBA's new 2%-abv Pacer and 4%-abv Omission seltzers, the brewer will launch a Kona hard seltzer on draught in Hawaii.

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