Redhook, Widmer merge, brew new business

Redhook, Widmer merge, brew new business
By Melissa Allison
Seattle Times business reporter






Redhook Ale Brewery of Woodinville plans to merge with Widmer Brothers Brewing in Portland to form a new company called Craft Brewers Alliance. It will be headquartered in Portland with management offices in both cities, officials said.

Existing breweries will remain, including Widmer's breweries in Portland and Redhook's in Woodinville and Portsmouth, N.H. The companies expect to continue making their existing beers, including Redhook's ESB and Widmer's Hefeweizen.

With combined production of 550,000 to 600,000 barrels a year, the new company will be one of the country's largest craft brewers, just behind Sierra Nevada Brewing in Chico, Calif.

The deal is expected to close in the first quarter, pending approval from regulators, Redhook's shareholders and Anheuser-Busch, which owns roughly a third of each company and will continue to own that much of the new corporation.

Ownership of the rest of the company will be split roughly evenly between the current shareholders of Redhook and privately held Widmer.

Craft Brewers Alliance will trade under Redhook's ticker symbol, HOOK. Redhook plans to issue about 8 million new shares, worth about $50 million, to give to Widmer's roughly 30 shareholders.

That will double Redhook's number of shares outstanding, diluting the stock of its shareholders but giving them ownership of Widmer as well.



Redhook Chief Executive Paul Shipman, 54, will be chairman emeritus of the new company, effectively retiring when the deal closes. He will get a severance package; the details are not yet public.

Shipman co-founded Redhook with Starbucks co-founder Gordon Bowker in 1981 after working for three years at Ste. Michelle Winery in Woodinville.

"I don't plan to stop working but I don't plan to work in the beer business," Shipman said. "I haven't figured out what I'm going to do but I have a penchant for alcoholic beverages."

He has guided Redhook through turbulent times, including many years without a profit. The company hit the rocks when it built two new breweries in the mid-1990s, shortly before a slew of craft brewers flooded the market.

Last year, Redhook saw its first annual profit in a decade.

On Tuesday, Redhook released third-quarter financial results, including a loss of $288,568, or 3 cents a share, on net sales of $11.1 million.

For the first nine months, it posted a loss of $80,044 or 1 cent a share.

The earnings and merger announcements came after the stock market closed. Redhook dropped 2 cents to $6.10 in regular trading. No after-hours trading was reported.

The stock has traded between $4.36 and $8.21 during the past year.

Although rising hops and barley prices promise to create problems in the coming year, Shipman said he's optimistic.

"Everybody's going to raise prices," he said of the industry. "It's not going to be pain-free ... but this is the new golden age of craft beer. The people who drink our kind of beer love the products, which take such a tiny percentage of people's incomes in the U.S. that they barely notice it."



Kurt Widmer, who co-founded the Portland brewery with his brother Rob in 1984, will become the new company's chairman. He turned away a merger offer from Redhook in the late 1990s, largely because he was concerned about uniting the corporate cultures.

Since then, the companies have gotten to know each other through a sales and marketing joint venture called Craft Brands Alliance. Redhook also brews Widmer beers on the East Coast.

"We've had a long, long look at each other," Widmer said. "There aren't a lot of unknowns left."

He considers Redhook a fellow pioneer in the craft-brewing industry and said both companies are committed to excellent beer and state-of-the-art breweries. Widmer is in the midst of an 18-month expansion of its main brewery in Portland.

The Widmer brothers will be involved in the brewing side of the business, while the administrative work will fall largely to two chief executives: Dave Mickelson, currently Redhook's president and chief operating officer; and Terry Michaelson, president of Portland-based Craft Brands Alliance, a partnership that will dissolve after the merger.

Only about six accounting jobs will be lost at Redhook's headquarters, Shipman said.

He expects the new company's size will allow it to expand faster in certain areas.

Redhook's New Hampshire brewery, for example, could make beer for Kona Brewing of Hawaii, in which Widmer has a minority stake. Widmer also owns a minority interest in Goose Island Beer of Chicago.

Exports are another possibility, Shipman said. Currently, Redhook exports beer to Japan in such small amounts that "you and I could drink that much," he said.

A new brewery also might be on the horizon, Widmer said.

"Having a brewery somewhere in the geographic center of the U.S. may make sense and is something we're considering in the next five years," he said.

General Information:
Redhook Ale Brewery

Founded: 1981 by former Ste. Michelle Winery executive Paul Shipman and Starbucks co-founder Gordon Bowker.
Headquarters: Woodinville
Beer sampler: ESB, Long Hammer IPA, Blonde Ale, Blackhook Porter
Employees: About 200
2006 sales: $40 million

Widmer Brothers Brewing

Founded: 1984 by brothers Kurt and Rob Widmer
Headquarters: Portland
Beer sampler: Widmer Hefeweizen, Drop Top Amber Ale, Snowplow Milk Stout
Employees: About 130, plus about 70 people who work for its sales and marketing joint venture with Redhook
2006 sales: $73 million, including the joint venture


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Redhook, Widmer Brothers will merge, but keep brands

here are a few excerpts:

"Redhook Ale Brewery Inc. of Woodinville and Widmer Brothers Brewing Co. of Portland said Tuesday that they will combine to form Craft Brewers Alliance Inc. The new company will maintain both brands."

"The new company will continue to trade on the Nasdaq stock market under Redhook's existing symbol, HOOK. The combined company will have headquarters in Portland but will have management offices in Woodinville. The deal could be complete by the first quarter of 2008, pending regulatory and shareholder approval. Redhook will swap about $50 million of its shares for those in privately held Widmer."