US: Pyramid completes Portland acquisition

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Seattle-based Pyramid Breweries has completed its previously announced acquisition of the brewing and brewery-restaurant assets of Portland-based Portland Brewing Company.

The company hopes the move will strengthen its future by combining two operations which complement rather than overlap each other. It is expected to enable the combined company to secure better distribution and retail presence.
"I think this is a great move for the two small independent craft brewers," said George Hancock, Pyramid Breweries chairman. "With Widmer and Redhook cooperating with Anheuser Busch, Bridgeport owned by the Corona importer and Full Sail brewing Henry Weinhard beer for South African Breweries/Miller, it is tougher for the small independent brewers. Pyramid and Portland Brewery getting together makes us stronger in the marketplace."

In the transaction, Pyramid acquired Portland Brewing's brewery and brewery restaurant assets for total consideration of approximately US$4.2m, consisting of a combination of assumed liabilities, cash, and unregistered Pyramid common stock.

The terms of the transaction also include a 5-year earn out which may result in additional payments to Portland Brewing Company based on sales of Portland Brewing brands during the earn-out period. Investors of the Portland Brewing Company will continue to be eligible for their daily free pint for a period of three years.

"We have been looking forward to completing this transaction with great anticipation," said Hancock. "The process of investing in the brewery and the MacTarnahan Taproom is underway and should both improve operations and add more capacity. We will also be investing in marketing for the MacTarnahan brand with a campaign that emphasizes the Scottish roots and independent spirit of 'Mac' MacTarnahan."

"This transaction will leverage our complementary strengths - the creativity and strong Oregon distribution of Portland Brewing's operations with Pyramid's sales, marketing and distribution resources in Washington and California - to drive the success of both Portland Brewing and Pyramid brands," says Portland Brewing CEO Jerome Chicvara.

In a separate release, Pyramid Breweries said its second quarter net revenue increased 10.6% to US$10.4m from the second quarter in 2003.

Net income for the quarter was US$145,000, a reduction of US$300,000 compared to the same period last year.

EBITDA for the quarter decreased US$253,000 or 23.8%, to US$810,000.

The company said that earnings for the quarter were impacted by planned increases in selling and personnel related expenses intended to boost future sales, rising freight costs, and non-recurring recruitment costs related to hiring a new CEO for the company.

For the second quarter total beer shipments increased 7.2%, to 34,540 barrels.

"We are pleased with the volume growth in the beverage division and the steady performance of the alehouses as they continue to build our beverage brands in their respective markets," said George Hancock, chairman and interim CEO. "The Pyramid brand carried strong first quarter performance into the second quarter of the year, particularly in California where total shipments increased 20% for the quarter and 18% for the first half of the year. The Thomas Kemper Soda business rebounded late in the quarter with a successful sales program aimed at driving sampling. Although these sales were lower margin, we believe that these premium products are differentiated by taste; thus sampling is crucial to the future of the brand."
"At first glance, net income for the quarter was disappointing, and indeed we are impacted by several cost increases which are outside of our control. However, the company places a higher priority at this time on strengthening its sales efforts, improving the quality of management and staff and building its brands to better compete in the market place. We believe this course to be in the best long-term interests of the shareholders," added Hancock.

Sectors: Beer & cider

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