Tilray Acquires BrewDog for Pocket Change

Say this about Tilray: when the company shows up at a fire sale, don’t expect them to be carrying more than a pocketful of spare change:

“Tilray Brands will acquire BrewDog’s brands, its brewery at Ellon in Aberdeenshire and its operations in the US and Australia…. The pubs included in the deal are based in Birmingham, Canary Wharf, Dogtap Ellon, Dublin, Edinburgh DogHouse, Lothian Road, Manchester, Paddington, Seven Dials, Tower Hill, and Waterloo.” (Daily Business Group)

The price was $40 million (£33 m).

This is just mind-boggling. In further words of the quoted article, “The price will come as a huge surprise to those expecting at least a three-figure tag for a company that was once valued at £1 billion.” Indeed it does!

To add a little perspective here, back in the era of craft consolidation, relatively small craft breweries were selling for $40 million. $100 million was common. BrewDog was, at its peak, an international company with four brewing facilities, 72 pubs, and 1,400 employees. It was carrying a lot of debt, however, and the days of those high brewery valuations are long gone. Tilray has been on a flea-market buying spree for a few years now, so in a way this makes sense—though I’ll confess it never crossed my mind.

BrewDog, which once had a vastly inflated valuation of £2 billion, is the very definition of a distressed asset:

BrewDog hasn’t been in the black since 2019;
Its a big firm, with around £350 million in average revenues, but
In the past five years, it’s lost a total of £148 million, and has had huge, roughly £50 m deficits in recent years.

What does the deal mean for Tilray and BrewDog?

220,000 small investors joined the “Equity for Punks” crowdsourcing scheme, “investing” on average £400. With this deal, they get nothing.
As a result of the acquisition, most of the brewery’s bars will close (38 of them).
As usual, Tilray enters the deal bullish about turning the brand around immediately, claiming they expect BrewDog to be “cash flow positive by 2027.” At a purchase price of $40 m, who knows?

The multinational beer companies who bought craft breweries in the teens are dumping them as fast as they can in the twenties, and Tilray has become the buyer of a last resort. From the initial purchase of SweetWater just before merging with Canadian cannabis company Aphria in the desperate early months of Covid, Tilray has now built a portfolio of (with BrewDog) fifteen breweries, including a bunch of recent AB InBev and Molson Coors castoffs. Add that to a growing number of other alcohol assets, and they have become a substantial player in booze—though even today, industry watchers are not sure how all these pieces will fit together. Tilray began life as a cannabis company, but with US legalization stalled out, it has leaned into alcohol.

One more contextual piece. It’s hard for me not to compare the almost immediate collapse in BrewDog’s business with Rogue’s at the end of last year. These are companies with substantial real assets, large production, and chains of pubs. No one thought they were healthy, but their ends were so sudden and so abject that they force me to reconsider the health of the beer industry. A lot of regional legacy breweries ply America’s waters. How many of them are almost bankrupt? How many more announcements like this are in our future?