Pyramid Brewing to combine with Magic Hat
Wednesday, April 30th, 2008Seattle Times business reporter
MIKE SIEGEL / THE SEATTLE TIMES
Scott Barnum, CEO of Pyramid Breweries, expects to leave after Vermont-based Magic Hat Brewing Co. completes its purchase of the Seattle beer maker, expected before September.
When R. Martin Kelly was chief executive of Seattle’s Pyramid Breweries a few years ago, he learned how cumbersome it is for a small company to be publicly traded.
Lawyers, accountants, paperwork and fees chew up time and money that could be spent on something more tangible, like making beer.
Kelly now runs a Vermont brewery, and on Tuesday it unveiled plans to acquire Pyramid for $2.75 a share, 56 percent above the previous day’s closing price.
Counting the Vermont brewer’s assumption of $10 million in Pyramid debt, the deal is valued at $35 million, according to executives and securities filings.
“They were spending a lot of money on being public that they couldn’t spend on being a brewery,” said Kelly, who left Pyramid in 2004 and is CEO of the privately owned Magic Hat Brewing Co. & Performing Arts Center in South Burlington, Vermont.
Pyramid CEO Scott Barnum said Pyramid spends almost $1 million annually complying with public company rules and regulations.
“This removes the shackles of being a public company and provides more opportunities for employees in the long run, being part of a bigger, more financially sound entity,” Barnum said.
Pyramid lost $1.8 million in the fourth quarter and $488,000 during 2007. It sold the Thomas Kemper Soda brand last year but continues to make soda for the new owner.
Earlier this month, Pyramid agreed to pay $1.3 million to settle a lawsuit alleging employees at three of its alehouse restaurants were denied adequate opportunity for meal and rest breaks.
Magic Hat sells beer in the East, while Pyramid’s sales are focused mostly in 13 Western states. At the moment, said Kelly, “we have no plans to change the way that business or our business operates.”
Barnum will leave after the deal closes, which is expected before Aug. 31. He said he expects Pyramid’s 500 other employees to keep their jobs.
Kelly was more tentative, saying Magic Hat needs to finish its “due diligence” — a process in which financial professionals go over the planned acquisition in detail — before he will know how the combined company might save money.
That process also will help decide whether the breweries begin producing each other’s beer, a move that would make Magic Hat beers available on the West Coast.
Pyramid is bigger than Magic Hat, producing about 200,000 barrels last year. It has large breweries in Portland and Berkeley, Calif., and operates alehouse restaurants there and in Seattle, Sacramento and Walnut Creek, Calif.
Magic Hat, known for quirky beer names like #9 and its annual Mardi Gras parade in Burlington, produced 102,000 barrels of beer last year. It was founded in 1994 and is still partly owned by co-founder Alan Newman. Among other owners is Basso Capital Management in Connecticut.
Magic Hat’s full name to the contrary, it does not have a performing arts center, Kelly said. The name is “part of our theatrical, irreverent take on the world,” which includes sponsoring performing artists.
News of the deal pushed Pyramid stock up 76 cents to close at $2.52 Tuesday. It has traded between $1.50 and $4.66 during the past year.
After Magic Hat completes its due diligence and the companies reach a definitive agreement, the deal must be approved by regulators and Pyramid shareholders.
Pyramid’s sale comes at a tumultuous time for the beer industry, with many small breweries struggling with the high cost of barley and hops, and worrying that consumers will not pony up when their pricey beer becomes pricier.
Those factors helped spur the merger this year of Woodinville-based Redhook Ale Brewery with Widmer Brothers Brewing in Portland and, on a much larger scale, the combination of Miller Brewing with Molson Coors.
Although Anheuser-Busch, Miller and Molson Coors collectively own a whopping 80 percent of the U.S. beer market, smaller breweries have carved into their market share over the past decade or so, said Ann Gilpin, an analyst at investment-research firm Morningstar.
Big beer companies have been selective in buying craft brewers, she said. “While they certainly have the financial strength to do it, they thought prices were too rich.”
If the Pyramid and Redhook deals are an indication, smaller breweries might be more willing to bargain now.
“I fully expect to see more [deals],” Gilpin said. “Whether it’s more consolidation within craft beer like Pyramid and Magic Hat, or big beer buying craft brewers, it could go either direction.”
Pyramid Breweries
Founded: 1984 as Hart Brewing in Kalama, Cowlitz County
Ownership: Publicly traded since 1995.
Volume: About 200,000 barrels in 2007.
Employees: About 500, including 350 at five alehouses.
Flagship beer: Pyramid Hefeweizen, which accounts for more than half of total beer shipments.
Distribution: 38 states; about 75 percent of the beer is distributed in 13 Western states.
Magic Hat Brewing Co. & Performing Arts Center
Founded: 1994.
Ownership: Privately owned by co-founder Alan Newman, Basso Capital Management in Connecticut, and others.
Volume: 102,000 barrels in 2007.
Employees: About 125.
Flagship beer: #9, which it bills as a “not quite pale ale.”
Distribution: 20 states from Maine to Georgia and as far west as Illinois.
Melissa Allison: 206-464-3312 or mallison@seattletimes.com
Copyright © 2008 The Seattle Times Company
Organic brewers from around the world celebrate sustainability June 27-29 in Portland, Oregon at the North American Organic Brewers Festival (NAOBF). The 2007 festival featured 50 organic ales and lagers, drew 7000 attendees and raised over $2000 for local charities. The largest organic beer festival in the world, the NAOBF was first held in 2003 in Gresham, Oregon, and has been an annual event since 2006. In addition to organic beer the festival features live music, local and organic food, and sustainability-focused vendors. 
barley grown with chemical fertilizers. Organic beer made its debut in the US in the mid 1990s’ and production has grown by leaps and bounds since then. Organic beer is now a more than 20 million dollar market in the US. The festival celebrates the diversity of styles of organic beers from pilsners, pale ales, porters, and ambers, to stouts, India Pale Ales, and a plethora of Belgian styles.
A benefit for Oregon Food Bank, Leukemia Lymphoma Society, and Oregon Tilth, the NAOBF celebrates numerous facets of sustainability. The chemical pesticides 
and fertilizers used in conventional agriculture are one of the leading causes of cancer. The Leukemia Lymphoma Society, helps those suffering from leukemia, lymphoma, Hodgkin’s disease and myeloma. The Oregon Food Bank feeds the hungry, and Oregon Tilth promotes sustainable agriculture and is one of the most stringent organic certification bodies in the nation.
the proceeds from which will benefit the Glen Hay Falconer Memorial Foundation, which maintains a Brewing Scholarship to the Siebel Institute of Technology brewing school. Eugene brewer Glen Hay Falconer was an organic beer pioneer while at the Wild Duck Brewery and Restaurant in Eugene. This years Sasquatch Legacy Project is the Imperial Vienna, brewed by 2007 scholarship recipients Corey Blodgett and Jacob Leonard using organic malt.
In the interest of sustainability the NAOBF is working to reduce its waste stream, and minimize its carbon footprint. This year the NAOBF has switched from plastic to cornstarch tasting glasses, which are 100% compostable. Conventional plastics not only take up landfill space, but have been linked to cancer, and are made from foreign petroleum. The cornstarch cups are made from domestically grown corn by Colorado-based Eco-Products, .
a zero-waste, solar-powered company. Onsite compost receptacles will be provided at the event for the cups and food waste. All food vendors are required to use compostable flatware and plates. A Biodiesel-fueled generator provides the festival’s energy needs, and attendees are encouraged to take MAX light-rail to the event. Vendors at the NAOBF promote sustainable living through their wares and services
Oregon Food Bank. The event is all-ages. Service animals only. There is no onsite parking, attendees are encouraged to take public transit. (MAX Yellow Line to Overlook Park stop). Bicycle parking will be provided.
Join us at Roots Organic Brewing Company on April 5, 2008 for the 2nd Annual Portland’s Cheers to Belgian Beers Festival. This festival was launched in the spring of 2007 and was held at Rock Bottom Brewery in it’s first year. Ten local Portland Breweries were challenged to create their own Belgian Style Beer Recipe with the same yeast strain. Proceeds generated from the festival were donated to charity.
