craft beer

Private Equity Brews Another Big Investment


April 10, 2017

TSG Consumer Partners announced it has bought a stake in a UK craft beer company. The deal leaves the US private equity firm with a 22.3% stake in BrewDog, with the brewer already considering an initial public offering.


The deal’s finer details


BrewDog started in 2007 when founders James Watt and Martin Dickie began their venture in the competitive craft beer industry. At the start, the Aberdeenshire-based brewer got by with a £20,000 (around $24,700) bank loan but since the early start, investors have begun interested in the business.


According to the reports, TSG Consumer Partners invested £213 million (around $263 million). The money will be partly paid to the brewer’s co-founders (around £100 million or $123 million), with another £100 million going directly into the business. The remaining amount is used for buying shares from early investors in the brewer.


Watt has told the BBC the private equity deal will help the business to have “the fire power to compete globally”. The brewer is currently building a new brewery in the US. It has also set its sights in Australia and Asia. However, Watt also highlighted the brand’s commitment to its UK roots to the BBC.


Rewards to early investors


Before the private equity deal, the brewer has relied on crowdfunding with around 55,000 small investors investing in the business. BrewDog investors will be allowed to sell shares this week, but only up to 15% of their holdings and a maximum of 40 shares. There will be around £13 million (around $16 million) available to the early investors.


According to the Guardian, Watt has guaranteed early investors could make returns of 2,800%. Early investors would be those that bet on the business in 2010. But even late-stage investors could make a 177% return if they choose to sell the shares.


The private equity deal sees Watt remaining as the largest shareholder, with a 25% stake decreasing slightly from 35%. Dickie’s shares will reduce from 30% to 22%.


Plans for an IPO


The private equity investment also saw the brewer acknowledge the long-term option of going public. Watt told City A.M. the aim is to go public within the next five years. “That’s one of the reasons we wanted to partner with TSG. They have successfully done IPOs before, which is our long-term plan,” he said.


Future prospects look promising, with the brewer making £7 million ($8.6 million) in pre-tax profit last year. Its revenues stood at £71 million ($87.9 million). The TSG investment values the company at £1 billion ($1.2 billion).


The brewer is known for its punk attitude and some might see the deal with a private equity firm as ‘interesting’. Josh Rubin tweeted, “Ooh, how very rebellious and punk. @brewdog is now 22 per cent owned by a major private equity firm.” However, the co-founders were downplaying the significance of the move. Watt said, “We’re not going to let the deal go to our heads, but Martin did buy himself a new jumper.”

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