Share Dilution

BrewDog and iPro reject takeovers

Two drinks companies of vastly different sizes plan to offer shares on the London Stock Exchange in the near future through initial public offerings (IPOs), after turning down private equity takeover offers.

BrewDog, the idiosyncratic craft brewer based in Ellon, north of Aberdeen, is expected to be valued at over £2billion, while Kent-based sports drinks company iPro will be worth a fraction of that.

Neither company has yet set a date to go public with their actions, but the fact that two such different beverage companies have chosen this path to further development underscores how confident their founders and owners are of their coming.

In recent years, owners of successful start-ups have sought to sell either to a larger competitor or to private equity firms to allow them and their early backers to profit from their business. .

For example, in December 2015, craft brewer Camden Town, launched in 2007, was acquired by the world’s largest brewer, Anheuser-Busch InBev, for around £85 million.

This gave enormous distribution potential and access to capital for expansion into the Hell’s lager and Camden IPA brands and allowed founder Jasper Cuppaidge to profit from the business he started with just one pub.

Greenwich-based Rival Meantime Brewery was sold to Japan’s Asahi Breweries in October 2016 after being acquired a year earlier by SAB Miller.

Going another route, in 2020 Herefordshire’s Chase distillery opted to be acquired by Diageo for an undisclosed sum to bring its craft gin and potato vodka ranges into the larger group’s portfolio. of premium adult beverages in the world. This allowed Diageo to add a prestige handcrafted range to its portfolio.

Chase owners have been rewarded for their skills and entrepreneurial spirit and assured of strong development funds to drive their brands forward as part of a global giant.

The most tempting route to finance business development may be a private equity buyout, selling to a finance house that hopes to grow the business enough to profitably exit it at a later date for the benefit of a corporation. rival or other financial engineers.

Both Brew Dog and iPro say they received private equity approaches but rejected them in favor of IPOs, becoming a publicly traded company and selling an initial tranche of existing shares on the open market.

Brew Dog co-founder and chief executive James Watt told the Mail on Sunday that an IPO would give “longer-term cash” to existing individual investors, whom the company calls “equity punks.”

“We’re pretty much working towards going public for them as much as anyone else,” he said. “They are the heart and soul of the business.”

“We had loads and loads of arrivals [takeover interest]“, including two approaches last year, he said, adding:” We are very passionate about our independence.

In its Equity for Punks campaign in 2018, Brew Dog raised £26m, enticing customers to invest with perks such as kudos for being a supporter, discounts of up to 10% in some of its bars and 20% in the brewer’s online store. , depending on the amount invested.

Until the shares are publicly traded, these backers have little opportunity to sell or buy more unless they participate in the company’s annual trading day, connecting potential buyers with sellers.

But given that Brew Dog is now Britain’s biggest craft brewer and has more than 100 bars worldwide and exports to more than 60 countries, the 200,000 backers who have signed up to previous fundraisers seem ready to make handsome profits from the IPO.

Annual sales growth has averaged 57% over the past decade and the company is on track to sell around 400 million cans this year.

Earlier this year, Watt recruited former Asda boss Allan Leighton as chairman to bring his expertise and seriousness to the fleet, which could take place later this year.

Brew Dog, which has been rocked by allegations of a “toxic” work culture, rewards salaried employees with a staff stock issue and profit sharing at its bars.

Tiny iPro is reportedly seeking to raise £100million from a share issue after rejecting offers from three private equity firms to sell a majority stake.

According to The temperatureThomas Garrad, who acquired the iPro brand in 2015, wants to raise working capital to support its further expansion by borrowing and selling a minority stake.

Sir Eric Peacock, the company’s chairman, said its turnover had risen from just several hundred thousand dollars in its first year under Garrad ownership to £22million by June of the year last and that it was “very profitable”. He predicts revenues of £43million this year.

It exports to 24 countries, with most of its production destined overseas, and has raised around £8m from individual investors since 2015 to help fund its growth so far.

Peacock said iPro rejected offers from three unnamed private equity firms because it was “premature to sell a majority stake”.

“If you go the PE route too soon, the dilution is huge,” he said.

The Sidcup-based company has promoted its low-sugar hydration drink to more than 50 endorsing sports organisations, ranging from the Scotland national rugby team to Crystal Palace FC.

His latest venture is supporting community Parkrun 5K races.