Two Leading Craft Brewers Intend to Merge

Magic Hat, Pyramid announce plans.

Magic Hat Brewing Company & Performing Arts Center Inc. and Pyramid Breweries Inc. today announced a letter of intent under which Magic Hat will buy Pyramid in an all-cash offer for $2.75 a share.

The proposed transaction is subject to the negotiation and execution of a definitive merger agreement and other conditions.

The offer price was a 56 percent premium over Pyramid's closing price on Monday.

The board of directors of Pyramid has approved the transaction, according to the release. The closing is anticipated to take place by August 31.

Magic Hat, based in Burlington. Vt., is one of the largest craft brewers on the East Coast and has been growing at a rapid clip. Acquiring Pyramid, which posted a fourth quarter loss and announced plans to cut staff, would give it a presence on the West Coast.

Martin Kelly, CEO of Magic Hat said in the release: “We have a great deal of respect for Pyramid’s brand heritage, award-winning beers and its dedicated employees, and look forward to consummating this transaction, which provides both strategic and financial benefits both to Pyramid’s and Magic Hat’s stakeholders.”

Pyramid CEO Scott Barnum said: “The combination of these two well established, high profile craft breweries will be very complementary given our respective brand portfolios and the geographies in which we predominantly operate. Additionally, there will be a number of important benefits for Pyramid to be part of a private company versus continuing to operate as a stand alone public entity. This consolidation makes both good strategic and financial sense and is well timed, particularly as the beer industry’s competitive dynamics continue to intensify.”

“The Company will continue to have offices in Seattle, its historical home, and will seek opportunities to capitalize on the enhanced assets and capabilities of the new combined entity,” he added.

The release can be seen here.

UPDATE:

Beer Marketer's Insights Express (subscription required) weighs in:

Deal would vault Magic Hat into #6 or #7 spot in our craft top 10 (which includes Leinenkugel) depending if/when Widmer/Redhook deal gets done. Puts together fast-growing Magic Hat, which cracked 100,000 bbls last yr, and perennial money-loser Pyramid, which cracked 200,000 bbls last yr (with strong lead brand in Pyramid Hefe), for a hopefully more financially viable entity than Pyramid is now. ... Recall, Magic Hat ceo Martin Kelly used to be ceo of Pyramid. Clearly, there is potential to roll Pyramid brands east (pulled back last yr in face of financial difficulties) and Magic Hat west. Magic Hat continues as change agent, which also has 40% of its volume sold thru AB network, including a number of large AB distribs, who became non-exclusive with its brands. Magic Hat also amidst expansion that will allow it to make 300,000 bbls of beer in Vermont, double its current capacity.

Lew Bryson and Jay Brooks also have some initial reactions.