Big Island Brewing to raise $10m

Wine merchant and Wavenet chairman Mick Stroud plans to have his Big Island Brewery business listed on the Australian Stock Exchange by June 11 following an initial public offering that will value the company at $20.5 million.

As reported in WA Business News this week, Big Island will issue shares at 40 cents each to raise $10 million to fund the development of a wholesale brewing operation, which will be based at the old Strongbow cider plant in Canning Vale.

Big Island has yet to brew a beer but it has very big brewing ambitions.

From day one it will have capacity to product 9 million litres of beer, more than twice the amount brewed by Lion Nathan-backed Little Creatures and Gage Roads Brewing Company.

"We also have the ability to increase production to 14 million litres accroding to demand," Mr Stroud said in a statement today.

One brewing industry executive told WA Business News that the company had a tough road ahead.

"That's a lot of beer to brew from day one," he said. "Brewing is such a tough market because Lion Nathan and Fosters control 90 per cent of the market and then there's the distribution side, which is dominated by Coles and Woolworths."

Big Island will be the fifth WA brewer to list on the Australian stock market in the past two years. Little Creatures brewer Little World Beverages is the only stock to perform above its issue price, with investors sitting on a 70 per cent premium to its $1 issue price. However the brewers that followed it on to the stock exchange boards - Gage Roads Brewing Co, Empire Beer Group and Oz Brewing Ltd - are all trading below their issue price.

Mr Stroud said Big Island would use the funds from the float to build its brand and market awarness to achieve significant presence in the premium and mid-strength beer market.

He added that the experience of its board and management was an advantage for the up-start brewer.

Big Island has recruited former Diageo Australia WA regional manager Shane O'Hart as managing director while former Lion Nathan brewing manager Hugh Dunn has been appointed executive director. Also joining the board are Justice O'Donovan, who relocated to Australia last year after a career with South African brewing giant SABMiller while Paul Giles, a markting executive who helped launch Matilda Bay's Dogbolter beer and the re-launch Stella Artois has also been appointed as a non-executive director.

Mr Stroud is also chairman of Total Wine Solutions Pty Ltd, which operates a wine bottling, packaging and distribution business in Jandakot.

Once listed Big Island will have 51.3 million shares on issue, with the IPO accounting for 48 per cent of the stock. It will also take oversubsriptions of 7.5 million shares valued at $3 million.

Big Island has purchased a brewhouse from Germany and is currenlty fittion gout the old cider plant and aims to be in production by the middle of the year with its first beers scheduled to launch in time for Christmas.

Hogan & Partners Stockbrokers Pty Ltd is the sponsoring broker to the Offer.

Big Island's announcement is below:

BIG ISLAND TO RAISE A$10 MILLION AND LIST ON ASX
Launch of New Western Australian Brewery

Western Australian brewing company Big Island Brewing Ltd ("Big Island") has lodged a prospectus with the Australian Securities and Investments Commission to raise A$10 million through an Initial Public Offering ("Offer") of ordinary shares at A$0.40 per share.

Big Island is a Perth-based brewing company focused on the production of naturally brewed Premium Full-strength and Mid-strength beer

The Company has purchased a high quality German brewhouse and is currently refitting the old Strongbow cider plant in Canning Vale, south of Perth. Brewing production at the site is expected to commence in mid 2007 with the first products launched in time for the 2007 Christmas season.

Once listed on the ASX Big Island will have 51.3 million shares on issue and have a proforma market capitalisation of $20.5 million based on the Offer price. Shares offered under the prospectus will represent approximately 48% of the expanded issued capital of Big Island based on full subscription of the Offer.

Proceeds from the Offer will be used for marketing to build awareness of the company's brands and to achieve a significant presence in the Premium and Mid-strength segments.

Big Island Chairman Mr Mick Stroud said the volume craft brewer had a number of competitive advantages that separate it from other listed brewing companies.

"From day one, the brewhouse will have the capacity to produce 9 million litres of beer making it one of the largest breweries in Western Australia. We also have the ability to increase production to 14 million litres according to demand," said Mr Stroud.

Mr Stroud said the experience of Big Island's board and management team was another significant advantage.

"The Big Island board brings together a well balanced team with extensive experience in brewing and the Australian liquor industry. This collective capability of corporate management, brewing, marketing and retail experience will oversee the future growth of the company," he said.

"We are particularly excited to have Hugh Dunn on board as Master Brewer given his eminent reputation in the industry. Hugh is an accomplished brewer and absolutely passionate about producing the highest quality beers with strong consumer appeal."

Managing Director Mr Shane O'Hart said that the Premium beer market represents a significant opportunity for Big Island.

"This segment of the market continues to grow as beer consumers trade up to premium products," Mr O'Hart said.

"Australian consumers are proven to be receptive to new and innovative offerings and we will be working closely with our customers to ensure Big Island products have strong consumer appeal.

"We believe our unwavering commitment to build brands that our consumers want and to work in partnership with our customers, combined with the experience of our board and management team, position us extremely well to take advantage of the opportunity that exists in the Premium beer market " he said.

Hogan & Partners Stockbrokers Pty Ltd is sponsoring broker to the Offer.