A-B Acquires Goose Island

Expansion planned for Chicago craft brewer

Published in CSP Daily News

CHICAGO--Anheuser-Busch Inc. has acquired Fulton Street Brewery LLC, known as Goose Island, a leading small brewer with sales concentrated throughout the Midwest, in a move that will bring additional capital into Goose Island's operations to meet growing consumer demand for its brands and deepen its Chicago and Midwest distribution.

St. Louis-based A-B is Goose Island's current distribution partner. It reached an agreement to purchase the majority (58%) equity stake in Fulton Street Brewery from its founders and investors, held in Goose Holdings Inc. (GHI), for $22.5 million. [image-nocss] Craft Brewers Alliance Inc. (CBA), an independent, publicly traded brewer based in Portland, Ore., that operates Widmer Brothers, Redhook and Kona breweries, owns the remaining 42% of FSB and reached an agreement in principle to sell its stake in FSB to A-B for $16.3 million in cash. A-B holds a minority stake (32.25%) in CBA.

Goose Island sold approximately 127,000 barrels of Honkers Ale, 312 Urban Wheat Ale, Matilda and other brands in 2010. To help meet immediate demand, A-B will invest an additional $1.3 million to increase Goose Island's Chicago Fulton Street brewery's production as early as this summer.

"Demand for our beers has grown beyond our capacity to serve our wholesale partners, retailers, and beer lovers," said Goose Island founder and president John Hall, who will continue as Goose Island CEO. "This partnership between our extraordinary artisanal brewing team and one of the best brewers in the world in Anheuser-Busch will bring resources to brew more beer here in Chicago to reach more beer drinkers, while continuing our development of new beer styles. This agreement helps us achieve our goals with an ideal partner who helped fuel our growth, appreciates our products and supports their success."

Hall will continue to be responsible for Goose Island beer production and the expansion of Goose Island's Chicago brewery, where production will continue and its business will still be based.

"The new structure will preserve the qualities that make Goose Island's beers unique, strictly maintain our recipes and brewing processes," Hall said.

A-B has distributed Goose Island brands since 2006 as part of an agreement with Widmer Brothers Brewing Co. of Portland, Ore., a co-founder of CBA, that provides Goose Island access to the network of independent wholesalers that distribute A-B beers. A-B also provides logistical support to all A-B wholesalers distributing Goose Island and CBA beers as part of that agreement.

Wholesalers currently servicing retailers with Goose Island beers will continue to do so with no disruption in service.

"These critically acclaimed beers are the hometown pride of Chicagoans," said Dave Peacock, president of A-B. "We are very committed to expanding in the high-end beer segment, and this deal expands our portfolio of brands with high-quality, regional beers. As we share ideas and bring our different strengths and experiences together, we can accelerate the growth of these brands."

A-B's purchase of FSB is subject to customary closing conditions, including obtaining required regulatory approvals. The transaction is expected to close in the second quarter of 2011.

The two Goose Island brew pubs are not part of the deal, but will continue in operation, offering consumers an opportunity to sample Goose Island's specialty beers and food selections.

As part of CBA's agreement to sell its 42% block in FSB to A-B, in addition to cash, A-B will provide enhanced retail selling support for CBA brands, will reduce distribution fees payable by CBA to A-B and will provide CBA additional flexibility with respect to future acquisitions and divestitures.

Founded by John Hall in 1988, Goose Island Beer Co. is one of the Midwest's first small breweries. Goose Island is acclaimed for creating ales including 312 Urban Wheat Ale, Honkers Ale, India Pale Ale, Matilda, Pere Jacques, Sofie and a variety of seasonal draft-only and barrel-aged releases, including Bourbon County Stout, the original bourbon barrel-aged beer.

A-B brews Budweiser and Bud Light. It also owns a 50% share in Grupo Modelo, Mexico's leading brewer. The company is a wholly owned subsidiary of global brewer Anheuser-Busch InBev.