[Virwill]

Wow. Didn't see this coming! https://www.delawareonline.com/story/news/2019/05/09/dogfish-head-brewery-merging-makers-sam-adams-beer/1155701001/

[denny]

Looks more like BBC bought DFH than a merger

[Robert]

^^^^
Yep.  The Calagiones and Dogfish's shareholders get shares of BBC, and the Dogfish brand's sales will be reported on BBC's balance sheet... that's a sale, not a merger.  The fact that the restaurants don't appear to  be included suggests BBC is interested in the brand and goodwill, and I bet the beers will be made regionally in Sam Adams plants... just like when ABI buys a brand.  What I find interesting is the talk of expectation of further consolidation in craft beer companies to better position the players for "beyond beer" ventures... sounds like fewer plants making smaller quantities and slimmer portfolios of more  beer brands, freeing up assets to invest in other alcoholic beverage and, no doubt, cannabis products.

[TANSTAAFB]

Denny, you're far more in the know than most of us. What are your thoughts on this? My initial impression after reading the story is that Sam & Jim realized that for the most part their portfolios don't compete, they share similar visions for the future of independent craft beer, and joining forces allows them to compete with AB Inbev and the other monsters of the industry.

Sent from my Pixel 2 using Tapatalk

[dmtaylor]

Big big win for Jim Koch, holy cow. To have Sam working for you maybe?!

[Robert]

Big big win for Jim Koch, holy cow. To have Sam working for you maybe?!

Sam's going to be on the board of Boston Beer.  The two apparently have a common vision, whatever it is. 

[Phil_M]

Dunno what this means for the craft beer as a whole, but this will probably be good for the consumer.

Maybe now I'll be able to find fresh 60 Minute, as opposed to the 3-4 month old crap I usually see. Sam Adams products are always fresh. (Dunno if they're buying them back, or just sell better...)

[waltsmalt]

Dunno what this means for the craft beer as a whole, but this will probably be good for the consumer.

Maybe now I'll be able to find fresh 60 Minute, as opposed to the 3-4 month old crap I usually see. Sam Adams products are always fresh. (Dunno if they're buying them back, or just sell better...)

Unfortunately in MN my experience with Sam Adams products always seems to lack any freshness.  I stopped buying it years ago.  I wasn’t buying much DFH either, but now it might completely turn me off if the quality goes down. 

[hopfenundmalz]

Both of them served on the BA board at various times, often together. They know each other.

Sam is the younger of the two, but he has kids that may be approaching college age. A consideration in my thinking.

SA might be be positioned to make the DFH large volume lines in their facilities.

Milton DE could concentrate on the kettle sours, sours,  funky, and other niche products in isolation from the clean beers.

Time will tell.

[Phil_M]

Dunno what this means for the craft beer as a whole, but this will probably be good for the consumer.

Maybe now I'll be able to find fresh 60 Minute, as opposed to the 3-4 month old crap I usually see. Sam Adams products are always fresh. (Dunno if they're buying them back, or just sell better...)

Unfortunately in MN my experience with Sam Adams products always seems to lack any freshness.  I stopped buying it years ago.  I wasn’t buying much DFH either, but now it might completely turn me off if the quality goes down.

IMO, Sam Adams doesn't suffer quality problems, just distribution ones. (Like all of craft beer...) That's why I see this helping all parties involved. Time will tell, of course, but I don't see this as a bad thing for the beer drinker. I like the idea of DFH's enthusiasm/spark with BBC's more stoic "it's beer" mentality.

[jdonisch]

Interesting quote at the beginning of the article in the Boston Herald: "When it came time to cash out a private equity investor, Dogfish Head Brewery founder Sam Calagione turned to an old friend, Boston Beer Co. chairman Jim Koch."
Leads me to believe that there's a lot more to the story than just a straight buy.  Yes, this is a great financial windfall for him and his family.  But from a business perspective I would speculate that Sam C. was looking to gain more independence from various, non-beer related investors and looked at a partnership with Koch as a way to get away from that and gain even more freedom than he already had... not to mention greater distribution.  So financially-driven?  For sure.  But I'm willing to give the benefit of the doubt.

[jdonisch]

Interesting quote at the beginning of the article in the Boston Herald: "When it came time to cash out a private equity investor, Dogfish Head Brewery founder Sam Calagione turned to an old friend, Boston Beer Co. chairman Jim Koch."
Leads me to believe that there's a lot more to the story than just a straight buy.  Yes, this is a great financial windfall for him and his family.  But from a business perspective I would speculate that Sam C. was looking to gain more independence from various, non-beer related investors and looked at a partnership with Koch as a way to get away from that and gain even more freedom than he already had... not to mention greater distribution.  So financially-driven?  For sure.  But I'm willing to give the benefit of the doubt.

Correction... Boston Globe, not Herald

[narcout]

Looks more like BBC bought DFH than a merger

There isn't enough information in that article about how the deal is going to be structured to make that determination. 

If you search "dogfish head" on the Delaware SOS website, there are a number of different entities, including Dogfish Head Craft Brewery LLC, Dogfish Head Holding Company, and Dogfish Head Companies LLC.  I don't see that they are saying anywhere which are being acquired and how.

From a consumer standpoint, I don't know if it really matters much.  Somehow, BBC will own some or all of DFH. 

I think the more interesting question is what type of control Sam will have in BBC.  The article notes the Calagiones are getting 407K shares of BBC, but it doesn't say what class or if there are any particular voting rights attached to them (though it does mention they are based on a share price of $314, which sounds like Class A?).  BBC common stock is Class A, and it comes with only limited voting rights.  Jim owns 100% of the Class B stock which allows him to elect a majority of the board of directors and unilaterally approve other important decisions.  Sam is getting a seat on the board, and I wonder what mechanism exists to ensure that he keeps it (directors being elected by shareholders).

There's more to the story than Company A buying the shares of Company B (or forming a wholly owned subsidiary that then mergers into Company B).

Edit: Well, stupid me wrote all of the above without doing a more thorough search of the BBC's most recent SEC filings.  They filed an 8-K two days ago with all the gory details.  The Calagiones are getting Class A stock, and the merger will be between a subsidiary of the BBC named Canoe Acquisition Corp. and Dogfish Head Holding Company (with Canoe being the surviving entity).

There's a lot of other interesting stuff going on (agreements to purchase shares of other DFH entities, employment agreements for both Sam and Mariah, etc.). 

You can read the full 8-K here: https://www.bostonbeer.com/static-files/b74ce9f7-e26b-41c4-b71b-76308ef67ac1

[ynotbrusum]

Thanks Narcout.  It looks like the DFH Investors members are getting cashed out and the DFH operating and holding entities owned by the Calagiones are getting stock and cash.  My guess is that there are assured director rights for Sam buried in the agreements in the form of a shareholder voting agreement, at least for a reasonable term.

[narcout]

Yeah, I think DFH Investors, LLC was the vehicle used by the private equity firm to purchase its 15% stake back in 2015.  I don't know how much they invested, but they're getting a cool $158 million.

My guess is that there are assured director rights for Sam buried in the agreements in the form of a shareholder voting agreement, at least for a reasonable term.

You got it.  Sam's employment agreement states that Jim will elect him to the board as a Class B Director at each annual meeting in the years 2020 through 2029.  Not sure what happens after that...