Anheuser-Busch InBev holds a near-32% stake in Craft Brew Alliance

Anheuser-Busch InBev holds a near-32% stake in Craft Brew Alliance

Craft Brew Alliance has strengthened its tie-up with major shareholder Anheuser-Busch InBev, which could see the brewing giant launch a takeover within the next three years.

The Portland-headquartered company, formed 12 years ago through a merger between Redhook Ale Brewery and Widmer Brothers Brewing Co, said late yesterday that it has secured commercial agreements with the US arm of AB InBev, Anheuser-Busch. The agreements, which include the expansion of CBA's portfolio to export markets, also give ABI a staggered, qualified offer option to acquire CBA.

ABI presently owns 31.6% of CBA, which is listed on the NASDAQ.

The agreements comprise an amended and extended master distribution agreement, an updated contract brewing arrangement, and a new international distribution agreement. Subsequently, CBA expects to make cost savings of around US$10m per year over a 12-year period, starting in 2017.

The contract brewing aspect will move around 300,000 barrels of CBA's production to facilities owned by Anheuser-Busch, while the international distribution agreement sees AB InBev take brands from CBA's portfolio to Brazil, Mexico and Chile. Earlier this year, AB InBev announced plans to launch two beers from CBA's Kona Brewing Co division in Brazil.

For AB InBev, yesterday's news also gives it the option to take full control of CBA: Should it move in the first 12 months of the agreement, AB InBev would pay a minimum of $22 per share, rising to $23.25 in the second 12 months and $24.50 in the third. If no offer is forthcoming, the brewing giant would have to pay $20m to CBA in 2019, as an "international incentive payment".

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"We … have always been candid about the competitive advantage of our distribution arrangement, which allows CBA to independently manage our brands and still enjoy the benefits of being a valued part of AB's exceptional wholesaler network," said CBA's CEO, Andy Thomas. "As both of our companies evolved over the past 18 months, it became clear that our strategic focus and commitment to the growth of craft beer were increasingly more aligned, and we started to explore ways to collaborate more closely."

Following the announcement, CBA's share price leapt by over 20%, hitting $21.31 at 1024 EDT today.