Item 1.01. Entry into a Material Definitive Agreement.
On June 10, 2020, Craft Brew Alliance, Inc., a Washington corporation
("Seller"), Kona Brewery LLC, a Hawaii limited liability company (the
"Company"), and PV Brewing Partners, LLC, a Delaware limited liability company
("Buyer", and together with Seller and the Company, the "Parties"), entered into
a Membership Interest Purchase Agreement (the "Purchase Agreement"), pursuant to
which, among other things, Buyer agreed to purchase from Seller 100% of the
outstanding membership interests of the Company (the "Equity Interests"). The
Parties entered into the Purchase Agreement in connection with the previously
announced Agreement and Plan of Merger, dated as of November 11, 2019, by and
among Seller, Anheuser-Busch Companies, LLC, a Delaware limited liability
company ("ABC"), and Barrel Subsidiary, Inc., a Washington corporation and
wholly owned subsidiary of ABC ("Merger Sub"), providing for the merger of
Merger Sub with and into Seller, with Seller surviving as a wholly owned
subsidiary of ABC (the "ABC Merger").
Subject to the terms and conditions set forth in the Purchase Agreement, at the
closing (the "Kona Closing") of the transactions contemplated by the Purchase
Agreement (the "Kona Transaction"), Seller has agreed to sell to Buyer the
Equity Interests for an aggregate purchase price of $16 million in cash, of
which $5 million will be payable at the Kona Closing and the remaining
$11 million to be paid by Buyer upon Seller's achievement of certain
construction and production milestones with respect to the New Brewery (as
defined in the Purchase Agreement), with an option for Buyer to defer up to $6
million of such payment for a year following the Kona Closing, subject to the
terms and conditions set forth in the Purchase Agreement. Any deferred amounts
will be subject to interest. Buyer expects to fund the purchase price with a
combination of debt and equity financing.
In connection with the Purchase Agreement, following the Kona Closing, Seller,
or an affiliate of Seller, will enter into certain ancillary agreements with
Buyer or the Company, including (a) a transition services agreement under which
Buyer will receive certain transitional services, (b) an intellectual property
license agreement providing for certain licensing arrangements regarding certain
Company-related intellectual property related to the "Kona" brand, (c) a brewing
and packaging agreement under which Seller and certain of its affiliates will
brew, bottle and package certain Company-branded beer products for Buyer on a
transitional basis and (d) a distribution agreement under which Anheuser-Busch
Sales of Hawaii, Inc., a Delaware corporation and an affiliate of ABC, will
provide certain sales, promotion and distribution services to Buyer in the State
of Hawaii.
The Purchase Agreement contains certain customary representations, warranties
and covenants of Seller regarding the Company, including a covenant to operate
the Company in the ordinary course of business consistent with past practice.
The Purchase Agreement also contains certain customary representations,
warranties and covenants of both Seller and Buyer relating to the Kona
Transaction. Closing of the Kona Transaction is conditioned upon, and will not
occur in the absence of, completion of the ABC Merger. The Kona Closing will
take place upon the later of (a) August 3, 2020 or (b) immediately following, or
on the business day of, the closing of the ABC Merger or such later date as
required by the Department of Justice (the "DOJ"), in each case, following the
satisfaction or waiver of all of the closing conditions to the Kona Transaction
(other than conditions that by their nature are to be satisfied at the Kona
Closing, but subject to the fulfillment or waiver of those conditions at such
time). The Purchase Agreement provides for certain termination rights, including
the right of either party to terminate the Purchase Agreement if Seller is
notified by the DOJ that (i) Buyer is not an acceptable purchaser of the
Company, (ii) the Purchase Agreement is not an acceptable manner of divesting
the Company (provided, however, in the case of (ii), only after the Parties have
reasonably sought to modify the Purchase Agreement to satisfy DOJ staff,
consistent with their obligations under the Purchase Agreement) or (iii) a
divestiture is not an acceptable remedy in order to obtain regulatory clearance
of the ABC Merger.
The foregoing description of the Purchase Agreement is only a summary, does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Purchase Agreement, a copy of which is attached to this report as
Exhibit 2.1 and is incorporated herein by reference. The Purchase Agreement has
been attached to provide investors with information regarding its terms. It is
not intended to provide any other factual information about Seller or the
Company. In particular, the assertions embodied in the representations and
warranties contained in the Purchase Agreement are qualified by information in
confidential disclosure schedules provided by Seller in connection with the
signing of the Purchase Agreement. These confidential disclosure schedules
contain information that modifies, qualifies and creates exceptions to the
representations and warranties and certain covenants set forth in the Purchase
Agreement. Moreover, certain representations and warranties in the Purchase
Agreement were used for the purpose of allocating risk between Seller and Buyer
rather than establishing matters as facts. Accordingly, the representations and
warranties in the Purchase Agreement should not be relied upon as
characterizations of the actual state of facts about Seller or the Company.
Item 7.01. Regulation FD Disclosure.
On June 10, 2020, Seller and ABC issued a joint press release which is attached
hereto as Exhibit 99.1 and incorporated into this Item 7.01 by reference.
The information contained in this Item 7.01 and Exhibit 99.1 shall not be deemed
to be "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities
of such section, nor will such information be deemed incorporated by reference
in any filing under the Securities Act of 1933, as amended, or the Exchange Act,
except as may be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
d) Exhibits
Exhibit No. Description
2.1 Membership Interest Purchase Agreement, dated June 10, 2020, by and
among Craft Brew Alliance, Inc., Kona Brewery LLC and PV Brewing
Partners, LLC.*
99.1 Joint Press Release, dated June 10, 2020.
*Exhibits and schedules have been omitted from this filing pursuant to
Item 601(a)(5) of Regulation S-K and will be furnished to the
Securities and Exchange Commission upon request.
*****
Forward Looking Statements:
Some of the statements in this Current Report on Form 8-K are forward-looking
statements (or forward-looking information) within the meaning of applicable
U.S. securities laws. These include statements using the words "believe,"
"target," "outlook," "may," "will," "should," "could," "estimate," "continue,"
"expect," "intend," "plan," "predict," "potential," "project," "intend,"
"estimate," "aim," "on track," "target," "opportunity," "tentative,"
"positioning," "designed," "create," "seek," "would," "upside," "increases,"
"goal," "guidance" and "anticipate," and similar statements (including where the
word "could," "may," or "would" is used rather than the word "will") and the
negative of such words and phrases, which do not describe the present or provide
information about the past. There is no guarantee that the expected events or
expected results will actually occur. Such statements reflect the current views
of management of Seller and are subject to a number of risks and uncertainties.
These statements are based on many assumptions and factors, including general
economic and market conditions, industry conditions, operational and other
factors. Any changes in these assumptions or other factors could cause actual
results to differ materially from current expectations. All forward-looking
statements attributable to Seller, or persons acting on its behalf, and are
expressly qualified in their entirety by the cautionary statements set forth in
this paragraph. Undue reliance should not be placed on such statements. In
addition, material risks that could cause actual results to differ from
forward-looking statements include: the impact on Seller's business, operations
and results of operations arising out of the COVID-19 pandemic; the inherent
uncertainty associated with financial or other projections, including depletions
and shipments? the effect of out-of-stock issues and lower contract brewing
shipments; price increases; gross margin rate improvement; the level and effect
of SG&A expense; the effect of the class action settlement; effective tax rate
changes; the risk that the conditions to the completion of the transaction may
not be satisfied, or the regulatory approvals required for the transaction may
not be obtained on the terms expected or on the anticipated schedule? the risk
that the conditions to the completion of the ABC merger may not be satisfied;
the outcome of any legal proceedings that may be instituted against the parties
and others related to the merger agreement? unanticipated difficulties or
expenditures relating to the transaction; Buyer's access to financing for the
acquisition on a timely basis? the risk related to the diversion of management's
attention from Seller's ongoing business operations? the risk related to the
change of Seller's business structure and a smaller size of Seller following the
closing of the transaction? and the response of business partners and retention
as a result of the announcement and pendency of the transaction. Additional
risks are described under the heading "Risk Factors" in Seller's Annual Report
on Form 10-K for the year ended December 31, 2019, filed with the U.S.
Securities and Exchange Commission on March 11, 2020 and any material updates to
these factors contained in any of Seller's subsequent and future filings,
including Seller's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2020, filed with the U.S. Securities and Exchange Commission on May 6,
2020. Forward-looking statements speak only as of the date they are made. Except
as required by law, Seller has no intention or obligation to update or to
publicly announce the results of any revisions to any of the forward-looking
statements to reflect actual results, future events or developments, changes in
assumptions or changes in other factors affecting the forward-looking
statements.
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