Pyramid Brewing and Magic Hat announced today that they will merge, pursuant to a letter of intent. According to the terms of the agreement, Magic Hat will acquire Pyramid in an all-cash offer and then the two will merge.
From the press release:
The proposed transaction is subject to the negotiation and execution of a definitive merger agreement. The merger agreement will provide for a first-step tender offer for outstanding Pyramid shares by an acquisition entity wholly owned by Magic Hat, to be conditioned upon the acquisition of at least 66 2/3% of the outstanding shares of Pyramid. The tender offer, if consummated, will be followed by a merger of Magic Hat’s acquisition entity with and into Pyramid. The proposed transaction is also subject to the satisfactory completion of a due diligence review by Magic Hat of the business, financial and legal affairs of Pyramid, and receipt of necessary consents and approvals of regulatory agencies and third parties.
The closing of the proposed transaction, subject to the conditions referred to above, is anticipated to occur not later than August 31, 2008. The board of directors of Pyramid has approved the transactions contemplated by the Letter of Intent.
“The combination of these two well established, high profile craft breweries will be very complementary given our respective brand portfolios and the geographies in which we predominantly operate. Additionally, there will be a number of important benefits for Pyramid to be part of a private company versus continuing to operate as a stand alone public entity. This consolidation makes both good strategic and financial sense and is well timed, particularly as the beer industry’s competitive dynamics continue to intensify,” said Pyramid CEO Scott Barnum. “The Company will continue to have offices in Seattle, its historical home, and will seek opportunities to capitalize on the enhanced assets and capabilities of the new combined entity,” he added.
Martin Kelly, CEO of Magic Hat said, “We have a great deal of respect for Pyramid’s brand heritage, award-winning beers and its dedicated employees, and look forward to consummating this transaction, which provides both strategic and financial benefits both to Pyramid’s and Magic Hat’s stakeholders.”
Hmm, not sure what to make of this yet. I’m not generally a fan of small companies becoming bigger through merger, but who knows. There’s certainly no market overlap between the two, so perhaps it will beneficial for both. We’ll have to wait and see.
After initially posting this, an industry insider friend of mine opined offline that he knew that Alan Newman, the owner of Magic Hat, had been looking for a way to get his brands to the left coast. Pyramid has a excellent distribution network which would be very beneficial to Magic Hat in reaching stores shelves out here. Both brands do pretty well in their own markets and so perhaps there is a mutual benefit. As my friend put it, it’s “a real make-sense deal.”
Interesting that Martin was the previous CEO of Pyramid, especially during the time when they bought Portland out. The following piece is from a Pyramid press release when they first hired on Martin. Interesting background.
Martin Kelly joined Pyramid with over 15 years of beverage industry experience, earned at Miller Brewing Company, Coca Cola Enterprises, and Coca Cola USA. At Miller, he served as Region Vice President for twenty three western states, and oversaw the operations of The Jacob Leinenkugel Brewing Company, a wholly owned subsidiary of Miller. Kelly commented, “I am very excited to be taking the reigns of Pyramid Breweries at this time. We have positive sales trends, strong brands, great beers, a strong Alehouse business, good cash reserves and, above all, a motivated team of great people who want to win. It is an outstanding opportunity.”
Without any further knowledge of the deal itself, and little of Magic Hat at all, this deal seems odd to me. Perhaps Magic Hat was sitting on some cash and decided to buy a brewing facility, not a brand, at a reasonable price. I love Pyramid beers, but they have lost money every year since at least 2002.
http://finance.google.com/finance?fstype=ii&q=NASDAQ:PMID
On the operational side, what direction will the new company go? Is this to bring Magic Hat brand beer to the West Coast, or Pyramid brand beer to East?
Regarding branding, I frankly loathe Magic Hat’s beer names. Have I tried any of their beer to gauge its quality? No. But I am certainly not going to try a “Circus Boy” hefe when there’s a Pyramid, SN, or even Widmere hefe on the self next to it. Why? Because Circus Boy sounds like sweat, hay and exotic animal dung. This seems like something simple, but I think the company must consider this if they want to bring Magic Hat to the virgin PNW market. We have a ton of established brands here, and unclear brand/marketing will not help a new brand establish itself.
Machiasman: you’re against Magic Hat for their beer names? Without even giving them a try? I’ll make fun of something like that about a beer if I’ve already tried their brew and hate it. When I saw the merger announcement at first I was anxious, and I still am a bit, but I felt a little better after seeing that Magic Hat bought Pyramid and not the other way around. The Magic Hat #9 knocks the Pyramid Apricot Weizen out of the park any day, and I love Magic Hat’s experimental streak. They really do innovative stuff. Pyramid has always struck me as very corporate feeling. I’ll be psyched if they start distributing Magic Hat out here on the west coast.
Have had most beers each makes. Pyramid makes more solid beers but Magic Hat is more experimental–both good and bad. Circus Boy lives down to its name and Pyramid Apricot is much better than #9 but Magic Hat is always willing to try something new and does keep things interesting. I believe Magic Hat would need more help with distribution on the west coast than Pyramid would here–I live in PA which has arcane case laws and still can get anything Pyramid releases. Good luck to the merger.
We have enough great beer on the Left Coast, but I was impressed with Magic Hat when I first taste a few of their ales at the GABF about five years ago. When I was in Rhode Island visiting relatives, Magic Hat was one of the few excellent brews I could find at the local “package stow-ah.” I haven’t bought any Pyramid for a long time now, but this news intrigues me.
I had never heard of Magic Hat until I tried their #9 beer, and was wildly impressed with the complexity of taste. When I got home I couldn’t find anyone on the west that carried the stuff and shipping from the midwest was like paying $21 for a six pack. I was stoked to find out about the Pyramid takeover and hope that it goes through so that I can buy a case.