Yesterday’s blockbuster deal announcement that Boston Beer will acquire Dogfish Head for combo cash/stock deal valued at $300 mil turned everyone’s heads. Even those already paying close attention to what Dogfish was up to with proposed legislation in Delaware. It’s largest craft player to sell since Lagunitas sold remaining half of its biz to Heineken in 2017. But largest new tie-up since Ballast Point sale to Constellation in 2015. Yet a strange, coincidence: both Dogfish and Ballast essentially the same size when these transactions announced. Dogfish Head just shy of 275K bbls last yr. Ballast at 277K bbls in 2015. Ballast grew by almost 100K bbls in 2016, but then over next two years lost all of those bbls. Declined to essentially exact same volume as Dogfish Head last yr, 275K bbls.
Fact that both of these deals also involve public cos require additional financial disclosures, which could broaden their impacts. Simply: while terms of other deals more private, details available here provide much clearer measuring stick for the industry, against which many others seeing how they stack up. In that respect, will this deal “reframe craft beer M&A”? That’s intriguing question posed by Consumer Edge’s Brett Cooper in extensive report this morn about the deal (and plenty more details below).
Brett estimates Dogfish EBITDA margin in range of 20-25%, or $23-28.75 mil. That suggests multiple Dogfish got somewhere between 10.5X-13.1X EBIDTA, Brett writes. sLooking across deals in broader bev biz, range of DFH valuations “are inexpensive multiples,” in his view. That “reasonable valuation” is top reason Macquarie analyst Caroline Levy is “impressed” by deal. Same conclusion can be drawn from per-bbl multiples pointed out by Goldman Sachs analyst Judy Hong. If Dogfish Head expecting 300K bbls this yr, according to release on deal, the $300-mil valuation equates to about $1,000/bbl. That’s lower than deal for Lagunitas at about $1,250/bbl and a very big difference from sky-high $8,500/bbl multiple for Ballast.
Furthermore, with this deal, Boston joins Lion (Kirin) as part of a “new set of buyers” in US craft, Brett suggests. He includes Lion because it recently hired Simon Thorpe to lead its North American craft efforts. Recall, Simon has significant M&A experience, gained thru years at InBev, established his craft chops leading Duvel Moortgat USA (Boulevard, Ommegang), then completed a stint running Pabst. So will Boston also be a bigger player in craft M&A going forward? See below. Then again, large strategic players have mostly been out of the craft M&A game for a while now. But “at these multiples,” Brett comments, the large strategic players may even sit back down at the negotiating table.
So, in other words, Constellation’s Ballast Point valuation re-framed and mainly inflated the way many small brewers saw the value of their own biz. That started a quieter period for large strategic deals in craft and even some smaller ones, as sellers often believed they were worth more than buyers were willing to pay. PE became a bigger player in craft M&A (the fallout from which is just starting to become clear, including with Dogfish’s deal). But will public nature of this deal similarly force folks to re-think what a small brewery is worth? If so, that clearly has implications for small brewers contemplating deals, not to mention potential deals that may already be in process.