TSG Partners Acquires 22% of BrewDog for £100M

Austin Ray

THE GIST
In a message to the Equity Punks shareholder group this morning, BrewDog co-founder James Watt announced that private equity company TSG Consumer Partners (Pabst Brewing Company, Pop Chips, SweetWater Brewing Company, Vitamin Water) has acquired “approximately 22% of [BrewDog] in a transaction where £100million in proceeds went into the Company for continued expansion and the balance to create early shareholder liquidity in a transaction that valued BrewDog plc at £1billion enterprise value. The deal is designed to deliver long term capital with 10 year time horizon.” 

WHY IT MATTERS
For shareholders, this means the chance to sell up to 15% of their shares back on Monday based on the £1B valuation. This means “punks” who invested £95 in 2010 could get £360 back next week. Some of them are unsurprisingly pleased by this development.

It’s also a major change in brand rhetoric for a company founded on opposing stuff like international conglomerates. One of the driving forces behind Brewdog's self-described propaganda was the deriding of financial sources, explicitly including venture capital firms, which they described as "Fat Cats" in crowd-funding blog posts and marketing stunts. 

But regardless of how people feel about the pivot, investors are getting paid back tenfold. And if you were an investor in "punk," then you were just as speculative on the commercial upside of it as BrewDog was. And now we know exactly what "punk" is worth.

“Fuck no” was the response Watt gave to a group of journalists in 2015 when, following the news of the sale of Meantime Brewery to SAB Miller the same year, he was asked if he’d ever to the same. While BrewDog is not selling outright, it appears Watt may be walking back those words. As Jason Notte put in a column for Marketwatch last year: “As the craft beer industry grows and learns, it gets less uncomfortable with certain aspects of the beer business that it once loathed.” Brewdog seem to have become very comfortable with the big business model they’ve now wholly embraced. It remains to be seen what other surprises the company's future might hold.

We'll update this story as it develops.

Here's Watt’s note in full: 

HEY EQUITY PUNK,

We are growing mega fast at the moment. We have broken the record for most consecutive years on the Sunday Times Fast Track 100 and in 2017 we are forecasting our growth will be even faster.

We recently shared our ambitious 5 year plan with you guys which included adding more capacity in Ellon and Columbus as well as building new breweries in Asia and Australia. All of these projects are immediate opportunities and they all link completely back into our core mission of making other people as passionate about great craft beer as we are.

We recently also let you know we were having discussions with a potential investment partner to provide additional growth capital in exchange for a minority stake in our business. We are delighted to announce that these discussions were concluded successfully with TSG Consumer Partners. TSG, based in San Francisco, are one of the world’s leading growth funds with successful investments in global brands like Pop Chips and Vitamin Water.

TSG has acquired approximately 22% of the company in a transaction where £100million in proceeds went into the Company for continued expansion and the balance to create early shareholder liquidity in a transaction that valued BrewDog plc at £1billion enterprise value. The deal is designed to deliver long term capital with 10 year time horizon.

The equity partnership with TSG will enable us to execute our 5 year plan more rapidly and better take advantage of the global growth opportunity we have built for ourselves. The deal will enable us to take our business, and your investment in BrewDog to the next level.  The details regarding the proposed investment were provided to all Equity Punks in advance of a special meeting held on March 29th to consider required changes to the company’s capital structure, and the Punk community overwhelmingly approved the terms by a vote of 95% in favour.

At a £1bn valuation, shares purchased in Equity for Punks I, which closed in February 2010, are now worth 2,800% of their original value. Even craft beer fans who invested in Equity for Punks IV last year have seen the value of their shareholding increase by 177% in just one year.

Our new partnership with TSG is a launch pad for us to turbocharge our mission to make the world as passionate about craft beer as we are, but it’s also a validation of our crowdfunding model. Our Equity Punks now own part of an independent business which has attracted an awesome partner that will help grow their investment even further.

Crowdfunding can no longer be viewed as alternative finance; this is the democratisation of finance.

The transaction with TSG involved some of our equityholders to realise a return on their ownership, and we’re pleased to extend to Equity Punks an opportunity to realise some of their gains as well. We will contact you all by email next week offering you the chance to sell 15% of your equity (capped at 40 shares per investor) at a £1bn valuation.

For Equity Punks who still believe fully in our company and its mission and prospects and who don’t want to sell any of their shares at this time, we will recognise your continued support and loyalty with an amazing beery alternative to the redemption opportunity. As a thank you for believing in us and continuing on this journey with us we will send you a voucher to collect 6 cans of our upcoming (and hotly anticipated) Vermont Style IPA in any of our bars, on us.

Ever since we first started this journey in Martin’s mum’s garage, BrewDog has existed to make other people as passionate about great craft beer as we are. We remain more laser focused on that goal than ever before. Martin and I still remain controlling shareholders and fully committed to BrewDog, and this investment will allow us to accelerate our mission.

We’re not going to let the deal go to our heads, but Martin did buy himself a new jumper.

James and the BrewDog Team x

[Editors note: Despite the "garage" brewery claims, it's worth noting that Martin got a Masters degree in brewing and distilling from Heriot Watt and worked for Thornbridge Brewery before starting BrewDog.]

—Matthew Curtis