Mighty Craft buys Mismatch Brewing Co.
Mismatch Brewing Co. is set to join the ranks of Mighty Craft’s portfolio of breweries.
It was revealed yesterday that the craft accelerator has agreed to acquire the brewery’s parent company, the Adelaide Hills Group, consisting of Mismatch, The Hills Cider Company, Adelaide Hills Distillery and 78 Degrees, which produces whisky, gin, vodka and RTDs.
According to a media release this morning, released after the news was broken by the Australian Financial Review yesterday, Mighty Craft will buy 100 per cent of the group, along with a 75 per cent stake in Lot.100, the group’s Adelaide Hills venue.
“We’ve been working on this for quite some time,” Mighty Craft managing director Mark Haysman told Brews News.
“[Our aim] was to build some scale into our business and good brands with good production capacity. They’re a great crew who have built a strong business with a strong brand in South Australia. It’s a great fit within our portfolio and probably fills a bit of a gap in our portfolio with cross-network production opportunities.”
The purchase price is reportedly equal to 5.7 times the group’s forecast EBITDA.
The deal, which Mighty Craft called “transformational” will see the combined group deliver an expected $78.7 million in revenue in 2022 and $6 million of EBITDA, up from initial projections of $50 million.
By comparison, indie craft drinks group Fermentum, which owns Stone & Wood Brewing, in its COVID-affected 2020 results reported profit before income tax of $8.18 million. This was after depreciation and amortisation costs of $2.9 million and finance costs of $1.2 million. These results were on revenues of $62.3 million, with recent reports suggesting the Byron Bay-based group was expecting revenue for the current financial year of $100 million.
Mighty Craft said that as a result of this purchase it will become a scaled alcohol producer, wholesaler and retailer with ‘significant’ economies of scale as well as one of the largest craft spirit producers in Australia.
The acquisition is funded by $27 million in cash and $20 million of consideration shares issued to AHG owners at $0.35 per share. 90.625 million shares will be issued under this placement and offer, representing around 30 per cent of Mighty Craft shares on completion of the acquisition.
At the same time, Might Craft announced a capital raise of $29 million, including an institutional placement of $11.3 million at $0.32 per share, and a non-renounceable entitlement offer to raise $17.7 million.
With regards to company structure going forward, the Adelaide Hills Group has the right, but not the obligation, to nominate a representative to the Mighty Craft board, the accelerator said.
Co-founders Ewan Brewerton, who founded Mismatch, Adelaide Hills Distillery’s Sacha La Forgia, Steve Dorman of 78 Degrees and Toby Kline of The Hills Cidery will be retained to drive growth for the brands.
“We’re investing half a million into Mismatch’s brewery straight away, bringing in more tanks and a malt silo and it will get to about 2.4 million litres per annum. They won’t quite fill that next year but leaves them a bit of capacity,” Haysman explained.
Mighty Craft went into a trading halt yesterday morning, prompting speculation about the announcement, but other rumours have abounded in the industry, including that Mighty Craft will be acquiring Tribe Breweries.
“There are always plenty of rumours but we’ve been very focused on this [the AHG deal]. It gives us three really scalable brands to take beyond South Australia as well,” Haysman said.
The acquisition includes the Lot.100 venue, which will not be rebranded at this stage, unlike other venues acquired by Mighty Craft at Moonee Ponds in Victoria or NSW’s Hunter Valley.
“It’s a magnificent site, Lot.100. It showcases all their brands, the venue sits on that site and over the lawn is the brewery and the distillery which are co-located. Both have enormous production capacity and were built with growth in mind.
“So we won’t be touching the format of that,” explained Haysman, “and we look forward to going up there for a beer!
“We’ve acquired their business, but a lot of acquisition price will go back into Mighty Craft shares, which shows their belief in us combining as a business to create a strong business together and combine the talents from the businesses
“For us, to be a listed Australian company that is playing an active part in developing Australian brands is something I’m really proud of.”
Mismatch joined up with The Hills Cider Company, Adelaide Hills Distillery and juice maker Ashton Valley Fresh back in 2016 to open a combined production facility. Ashton Valley Fresh has not been included in the most recent deal.
The project, which was partially funded with a $950,000 South Australian Regional Development Fund grant, created a tourism experience with new brewing facilities for Mismatch, and a venue for the brands, Lot 100, which was opened in 2018.
Mismatch was launched in late 2013 and until it built its own brewery, was contract brewing at Big Shed Brewing Concern.
The move to buy the SA brewery marks a return to acquisitive form for Mighty Craft, which was prolific in acquiring businesses in 2019 and announced its focus on own-branded venues last year before
Since then, losses relating to its acquisition of the breweries and venues operating at less than full capacity, have been balanced by record revenue growth.