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SweetWater Brewing Preparing for IPO

By: Chris Furnari - Brewbound - Date: 07/23/2015

Atlanta’s Sweetwater Brewing is reportedly planning to go public.

Reuters, citing sources familiar with the matter, said Sweetwater is “in talks with banks about a stock market flotation that could come later this year and value the company in the hundreds of millions of dollars.”

The news comes just one week after SweetWater made two key executive changes. The company promoted former chief financial officer, Kim Jones, to the position of CEO. At the same time, SweetWater hired Bill Waters, a former Molson Coors executive, to take over as CFO.

If SweetWater were to make a public offering, it would join Boston Beer (SAM) and Craft Brew Alliance (BREW) as the only craft-focused companies currently trading on either of the two major U.S. exchanges — the New York Stock Exchange and the NASDAQ. A handful of craft breweries, including Mendocino Brewing (MENB), Appalachian Mountain Brewing (HOPS) and American Brewing (ABRW) currently trade on the over-the-counter market.

Recall that last September, SweetWater sold a minority stake to TSG Consumer Partners, a private equity firm that also co-invested in last year’s acquisition of Pabst Brewing.

Rumors of a potential SweetWater IPO surfaced earlier this year, according to Craig Farlie, an investment banker and partner in Farlie Turner & Co. About six months ago, Farlie said he was asked to help recommend and refer potential candidates for a CFO position at a “Georgia Brewery that was considering an IPO.”

“The request came from someone in the private equity community that knows I do some work in craft beer,” he told Brewbound. “A recruiter had reached out looking for someone in the space and an email mentioned a large craft brewery in Georgia that was looking into going public.”

When asked about the Reuters report, Farlie said he believed it was “highly likely” that SweetWater, and other craft outfits, could be considering public offerings.

“How successful could it be in the long run? I guess the jury is out,” he said. “It will depend on how the space grows over time.”

At least one other craft group, the private-equity backed Enjoy Beer LLC, which was launched by former Harpoon executive Rich Doyle, has publicly stated its interest in going public.

After Enjoy Beer made its first acquisition of Louisiana’s Abita Beer in April, Doyle told Brebwound that the company would look to purchase five breweries and consider an IPO.

“There are top 20 craft breweries that could certainly be public companies, but they might not have the scale to do it well,” he said at the time. “If you want to be a public company, you need to have a certain scale, absolutely.

So why would a company like SweetWater, which produced 193,000 barrels in 2014 and is significantly smaller than both Boston Beer (SAM) and Craft Brew Alliance (BREW), entertain a public offering? Farlie offered two potential explanations.

“They could use the proceeds raised in an IPO in two ways. The capital could go towards equipment purchases and new market expansions. And the second would be for acquisitions,” he said.

Reached by text message, a SweetWater executive declined to comment.

Nevertheless, Reuters does have a track record of accurately predicting brewery transactions. In March 2014, the news outlet reported that Pabst Brewing was for sale. Six months later, Pabst was sold to Eugene Kashper and TSG Consumer Partners. And in 2012, citing “sources familiar with the matter,” Reuters reported that North American Breweries (NAB) could be sold for $400 million. One month later, NAB was sold to Cerveceria Costa Rica, S.A. for $388 million.

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