web analytics

Gage Roads to buy back Woolworths shares

August 30, 2016

PowerPoint PresentationWestern Australia’s  Gage Roads Brewery has announced a capital raising to buy-back Woolworth’s 25 per cent stake in the brewery with a view to “Returning to Craft”.

Woolworths acquired the 25 per cent share in the brewery, which this year claimed the Trophy for Champion Australian Beer at the Australian International Beer Awards, in 2009.

Woolworths had originally committed to purchasing about 1 million cases a year of private label beer from the brewery, though these volumes have been declining over the term of the agreement and Gage Roads also took a hit with Woolworths cutting its inventory levels. Over the same period, Gage Roads has been experiencing growth in its proprietary brands and earlier this year projected a return to profitability on the back of that growth.

Gage Roads’ revised strategy “Returning to Craft” is focused on growing its proprietary craft beer portfolio and the production of consistently high quality, higher margin products.

The Gage Roads announcement is below and the presentation to shareholders is attached.


30 August 2016

Underwritten non-renounceable entitlement offer and placement to raise $10.1 million

  • A fully underwritten 4 for 5 non-renounceable entitlement issue of Shares to existing Shareholders to raise approximately $8.5 million
  • Complete an institutional placement of 63,900,000 Shares to raise approximately $1.6 million
  • Buy-back and cancellation of 100,016,305 Shares currently held by Woolworths Limited
  • Repay $4.7 million of existing debt, refinance and remove Woolworths as guarantor of the remaining debt
  • Engage key management and employees, aligning shareholder interests with operational success

Gage Roads Brewing Co. Ltd (ASX: GRB) (“Gage Roads” or “the Company”) will today lodge a prospectus with the Australian Securities Exchange (“ASX”) for a fully underwritten non-renounceable entitlement issue and an institutional placement to raise $10.1 million (before costs).

Under the proposed transaction, eligible Shareholders will be able to apply for 4 Shares for every 5 Shares held by those Shareholders registered at the record date at an issue price of $0.025 per Share (“Offer”).

The Offer will be complemented by a placement to institutions of 63,900,000 Shares, also at the issue price of $0.025 per Share, under the Company’s current 15% placement capacity to raise approximately $1.6 million (“Placement”).

Funds raised will be applied to buying back and cancelling, subject to Shareholder approval, Woolworths Limited’s (“Woolworths”) 23.5 per cent stake in the Company at an agreed price of $0.015625 per Share. This will provide the Company the independence necessary to pursue its five-year operational strategy, ‘Returning to Craft’ (investor presentation attached).

The balance of the funds will be used to pay down $4.7 million of existing debt, materially de-leveraging the Gage Roads balance sheet, and providing the required working capital and financial flexibility to successfully deliver on the Company’s strategy. Refinancing of the remaining $5 million of debt facilitates the removal of Woolworths as guarantor of the Company’s remaining debt.

The transaction also allows up to 38 of Gage Roads’ key management and employees to invest alongside institutional and retail shareholders and puts into effect an incentive plan that aligns with annual EBITDA targets andtenure conditions for financial years 2017 through to 2021.

Gage Roads Managing Director, Mr John Hoedemaker, said:

“The proposed transaction gives our shareholders, and the Gage Roads management team, the opportunity to buy back the brewery and return Gage Roads to its founding ethos and heritage of being an independent brewer of high quality craft beer.

“We launched the new five-year operational strategy earlier this year, underpinned by the rapidly growing demand for high quality craft beer in Australia. The final piece in rolling-out the strategy was achieving independence and the proposed transaction, we announced today, gives Gage Roads that flexibility and capacity.”

Strategy Overview and Transaction Rationale

Gage Roads’ revised strategy “Returning to Craft” is focused on growing its proprietary craft beer portfolio and the production of consistently high quality, higher margin products. Gage Roads is one of the largest independent craft beer brands in Australia and the only brewer currently listed on the ASX.

Integral to the Company’s strategy is building a greater awareness of its brands through the expansion of its national sales and marketing team.

The Company has a coordinated plan to open up opportunities for consumers to trial its products and engage with the Gage Roads brand values and ethos, through hotels, pubs and retail outlets nationally.

Since 2009, Woolworths has been a major shareholder of Gage Roads, providing production, supply and distribution support to the Company, and access to up to 25 per cent of the total beer market in Australia.

Gage Roads will retain the continued support of Woolworths via the recently executed three-year extension, with a further two-year option, of its supply and distribution agreement with Pinnacle Liquor Group Pty Ltd, a subsidiary of Endeavour Drinks Group (formerly Woolworths Liquor Group), as announced in May 2016. Over time, the supply agreement with Pinnacle sees the Company slowly un-wind the volume of contract production as we aim to replace that volume with growth of our proprietary brands.

The proposed buy back of Woolworth’s shareholding in Gage Roads is aligned with the Company’s commitment to growing its in-house brands, lessening its dependence on the contract brewing of mainstream beersand opening up distribution channels of its products to the remaining 75 per cent of the Australian beer market.

The proposed Transaction will provide Gage Roads with the ownership structure and financial flexibility, through materially lower debt and an improved working capital position, to successfully deliver upon its “Returning to Craft” strategy.

Transaction Timetable

  • Lodgement of Prospectus with the ASIC        30 August 2016
  • Lodgement of Prospectus & Appendix 3B with ASX    30 August 2016
  • Notice sent to Shareholders             1 September 2016
  • Ex date   2 September 2016
  • Record Date for determining Entitlements   5 September 2016
  • Prospectus sent out to Shareholders & Company announces this has been completed     7 September 2016
  • Closing Date*       28 September 2016
  • Shares quoted on a deferred settlement basis            29 September 2016
  • Annual General Meeting of Shareholders      30 September 2016
  • ASX notified of under subscriptions               4 October 2016
  • Issue date/Shares entered into Shareholders’ security holdings              4 October 2016
  • Quotation of Shares issued under the Offer*               5 October 2016

* The Directors may extend the Closing Date by giving at least 3 Business Days’ notice to ASX prior to the Closing Date. As such the date the Shares are expected to commence trading on ASX may vary.

Please find attached an investor presentation relating to the transaction and the 5-Year Strategy “Returning to Craft”.


Swindler Summer Ale

Tags: ,

2 Responses to Gage Roads to buy back Woolworths shares

  1. K Lindsay on September 6, 2016 at 10:07 am

    As I shareholder I’m Extremely disappointed by Gage Roads performance….I do not agree with senior mangement and directors giving themselves a share bonus… how about giving us little share holders some return for once

  2. Fuzz on August 30, 2016 at 10:53 am

    Realised the market that made them popular is also the market that can make them redundent! There is so much choice out there now and with the evergrowing backlash against the big players i’m not surprised!

Leave a Reply