New Belgium Brewing, the fourth largest craft brewery in the United States, is set to join Australian-based Lion Little World Beverages, the global craft beer division of Australasian brewer, Lion, which is part of Kirin from Japan. The deal includes all shares of San Francisco's Magnolia Brewing Company, which New Belgium purchased with Dick Cantwell and Belgian brewery Oud Beersel in 2017 out of bankruptcy in a USD 2.7 million deal. (inside.beer, 11.8.2017).
Terms of the transaction were not disclosed but Forbes cited sources with knowledge of the deal stating a purchasing price between USD 350 and USD 400 million. Since the brewery is owned by an employee stock ownership plan (ESOP), the deal is all contingent on share-holding workers, who will need to approve the conditions of the agreement.
New Belgium was founded in 1991 by Jeff Lebesch and his wife Kim Jordan in Fort Collins, Colorado. Lebesch went on a mountain-bike tour through Belgium in 1988 and fell in love with the country's beer. After the couple separated, Lebesch left the company and in 2000 Jordan sold 41% of the brewery to an ESOP. In the following years she transferred the company to “more a social movement than a brewery” like one of the former employees put it. In 2013 all of the remaining shares and those of other stakeholders were also sold to the ESOP, thus creating a fully employee-owned company.
In 2016, New Belgium opened a second brewery in Asheville, North Carolina, which costed USD140 million and increased production capacity by 50%. However, the investment was seemingly a little bit too optimistic. Already in late 2015, before the new brewery was completed, Jordan tried to sell the company with no buyer willing to pay the asked USD 1 billion. In the following years many long-time employees left the brewery, including Christine Perich, a 16-year New Belgium veteran, who was elected to succeed Jordan as CEO but resigned her job after just one year without explanation. In 2017, the company hired Steve Fechheimer as new CEO after a nine-month-long search (inside.beer, 18.07.2017). In 2018, New Belgium produced nearly one million hectoliters of beer (850,000 barrels), a decline of 11 percent from 2017.
In an open letter published at the company’s website, Jordan, explained the reasoning behind the deal. “At New Belgium, we’ve needed to balance the cash demands of our ESOP and selling shareholders, with the operational need for more capacity (hence the brewery in Asheville) and the need to grow our brand by reaching more beer drinkers with our brand message. These are a lot of competing priorities and it has been difficult to do all of them as well as we’d like,” she explained. “Having the support and resources of Lion Little World Beverages, allows us to attend to those competing priorities and utilize our brewery capacity to its fullest.”
“We will no longer be employee owned and it would be easy to see that as a drawback. But here’s another way to look at it. More than 300 employees are receiving over $100,000 of retirement money with some receiving significantly greater amounts. Over the life of our ESOP, including this transaction, the total amount paid to current and former employees will be nearly $190 million. We will have helped a significant number of people realize the upside of having equity in something, being a part of the American Dream!” she said.
With the loss of independence, New Belgium will obviously lose its status as a craft brewery as defined by the Americans Brewers Association (BA) but so did many others that sold in the last year.
“We can’t wait to see what happens next,” says Jordan in her letter. “We are as committed to being a vibrant, values-driven enterprise as we’ve ever been, and we look forward to having a beer with all of you along the journey!”
The transaction is the first deal arranged by beer industry veteran Simon Thorpe, who was hired six months ago by Lion to lead its North American craft beer business.
"We’re excited to welcome New Belgium Brewing into the Lion fold and take a significant step forward in the largest craft beer market in the world,” said Lion CEO StuartIrvine in a press statement. “We’re confident that our shared values and commitment to purpose and culture will provide the foundation for a great partnership in the U.S. Kirin has entrusted Lion with leading its global craft beer strategy and today’s announcement is an important milestone for all of us as we look to drive growth in markets beyond Australia, New Zealand and Japan.”