Anchor Steam beer snapped up by Japan's Sapporo in US push

[TOKYO] Anchor Brewing Co, a century-old San Francisco brewer that helped pioneer the craft-beer movement, will be acquired by Sapporo Holdings Ltd, part of a push by Japanese beverage companies to seek growth on US soil.

The business, best known for Anchor Steam beer, fetched about US$85 million in the transaction, which is slated to close by the end of the month.

The deal reflects mounting pressure by craft brewers to find deep-pocketed partners as they face an increasingly crowded market. For Sapporo, the challenge is coping with a slowdown in its home country. Beer consumption in Japan has been on a steady decline in the last decade as the number of young people reaching drinking age shrinks.

The Anchor purchase also helps open more channels to sell existing brands. Until now, the company has sold beer in the US that was made in Canada, Sapporo Holdings President Masaki Oga said in a briefing with reporters Thursday.

"With the Anchor acquisition, we will have the capability to make and distribute beer in the US," said Mr Oga, who took the helm at the beginning of this year. "We will also speed up expansion of Sapporo premium beer."

Sapporo, Japan's fourth-largest brewer, operates six beer factories in its home country and three in North America. That includes Canada's Sleeman Breweries Ltd, which it acquired about a decade ago.

Anchor Brewing is the 22nd-largest craft brewer in the US by sales volume, according to figures released by the Brewers Association in March. It has one production plant in San Francisco and posted annual sales of about US$33 million in 2016, according to Sapporo.

That's a tiny fraction of the Japanese brewer's sales, which amounted to 541.8 billion yen (S$6.65 billion) last year. But the deal provides the company with cachet and a bigger foothold in a key market.

Craft-beer deals had gotten frothy in recent years, but the M&A climate has cooled in 2017. That may have helped Sapporo get a better price with Anchor Brewing.

Sapporo is paying about 2.6 times annual revenue for Anchor, compared with the 8.7 times revenue US-based Constellation Brands Inc paid for craft brewer Ballast Point in 2015. That same year, a closely held Spanish brewer, Mahou-San Miguel Group, considered buying a minority stake in parent Anchor Brewers & Distillers LLC, weighing an investment of as much as US$300 million, according to people familiar with the matter at the time.

Anchor Brewing was founded in 1896, and was rescued from closure in 1965 by Fritz Maytag, heir to the Maytag washing machine company. It was sold to the Griffin Group, an investment and consulting firm, in 2010.

The Anchor deal is the latest for Japanese brewers. In October, Kirin Holdings Co acquired a stake of about 25 per cent in Brooklyn Brewery for an undisclosed sum. Asahi Group Holdings Ltd, which has been on a buying spree that included purchasing about US$11 billion of SABMiller Plc's brands last year, said in July it planned to bolster its craft beer output to five times its current level.

Sapporo's Anchor purchase is "likely a multistep approach in terms of craft," said Bloomberg Intelligence analyst Thomas Jastrzab. "We're seeing some consolidation within the craft beer market in the US. This may be the first of further acquisitions for them."

BLOOMBERG