Beer Marketer's Insights

Pabst Buyer Will Be Metropoulos for About $250 Mil, Say Reports; What’s He Buyin’?

06-07-2010

Wave of reports in week prior to Memorial Day that C Dean Metropoulos will buy Pabst for about $250 mil, but apparently they've not yet dotted i's or crossed t's. "Deal in final stages," wrote WSJ 5/25. Neither Metropoulos nor Pabst commenting at presstime. With deadline looming for charitable foundation to sell and leaked details about price/ financing, likely Pabst finally has buyer. We'll hedge slightly. A few mos back, as INSIGHTS reported, Morgan Stanley Private Equity very close to altar but no deal. If deal happens, C Dean Metropoulos would be biggest example yet of intriguing trend: private equity much more active/interested in beer. Other examples include KPS purchase of Labatt and High Falls, Magic Hat buy of Pyramid and recent deal to buy Anchor Steam. With big 2 controlling 80% of beer volume but currently losing share in declining category that is also exploding into niches, a Pabst buyer could have real oppys. C. Dean Metropoulos is savvy dealmaker who has revived several traditional brands and sold Pinnacle Brands to Blackstone for $2.2 bil in 2007. He also ran cos with many famous brands, including Bumble Bee Tuna, Chef Boyardee, Jiffy Pop, Vlasic, Duncan Hines etc.

At $250 mil or so, deal wouldn't leave much for charitable foundation, since Pabst still projected to owe over $160 mil to MillerCoors and over $55 mil of unfunded pension liability at end of 09. Asking price had been $300 mil all in. Recall, Pabst EBIT at $22.8 mil in 08, projected to be slightly less in 09 (don't know final). Pabst rev's near $500 mil in 09, so it's EBIT margin not quite 5% (compare to Crown at 20%). Pabst $$ sales up for 3d yr in row, tho its volume still down slightly. Pabst has less than 200 employees. Pabst, Colt 45 and Old Milwaukee families over 60% of Pabst volume, projected at 1.8 mil bbls, 950,000 bbls, and 810,000 bbls respectively in 09.

How's Pabst doing in 2010? Better than AB/MillerCoors, tho not as well as many smaller domestic players, some growing at explosive rates. Pabst volume up for 1st time in many yrs in 1st qtr (even if just slightly) and projected to be up for 6 mos, INSIGHTS understands. Pabst total volume down 0.6% in Symphony IRI food/drug/convenience thru May 16. But revs up 5.3% as it's increasing price. Pabst Blue Ribbon volume up 23.4% YTD and 42% of Pabst volume in these channels. But Pabst brands #2-9 all down so far in scan in 2010. That includes Old Mil down 15%, Colt 45 down 4.5%, Schlitz Malt down 5.2%, Old Mil Light down 25%. Even Lone Star/Light, which had shown signs of life in 09, down 7-8%. Old Style down 29%. Those brands another 43% of Pabst biz. Doesn't leave much. Rainier showing uptick. In addition to Pabst Blue Ribbon strength, lotsa declining brands, buyer would get dozens of inactive labels, plus smaller craft plays like McSorley's and Southampton. In all it's low margin business with many encumbrances, tight production tie to MC thru 2014. But with fluidity of current beer mkt and right hands at helm, not hard to imagine bright future. Now just waiting for a done deal.