Gage Roads seeks cash to buy out Woolies

Gage Roads Brewing Company will tap the market for $10.1 million to buy back Woolworths’ stake in the Palmyra-based brewer, capping off a busy 12 months where it created Australia’s best beer while also returning to profitability.

The capital raising plan comprises a four-for-five entitlement offer for existing shareholders, to raise $8.5 million, while a further $1.6 million will be raised via an institutional placement.

Both offers will be priced at 2.5 cents per share.

Gage Roads Brewing chief executive John Hoedemaker said the funds would allow the brewer to reacquire the 23.5 per cent shareholding owned by supermarket giant Woolworths, while $4.7 million would be used to pay down existing debts.

He said the transaction was a key element of the brewer’s five-year plan to focus more firmly on brewing its own-branded craft beers.

Woolworths has been a major shareholder of Gage Roads since 2009, while the supermarket chain’s Sail & Anchor-branded beers and Castaway Ciders are also brewed at the Palmyra brewhouse.

While Woolworths will be removed from the Gage Roads share register following the transaction, a supply and distribution agreement with the Woolworths-owned Pinnacle Liquor Group will remain in place.

However, Gage Roads said it plans to reduce the amount of beer it brews on behalf of Pinnacle over time, with the extra capacity at the brewhouse to be used to grow its own-branded beer production.

Meanwhile, Gage Roads today announced it had returned to the black, lodging a $612,353 net profit for the 2015-16 financial year.

Revenue was up 5 per cent, to $25.5 million, while the result was a solid rebound from an $826,822 loss in FY2015.

Much of that revenue was thanks to an 83 per cent lift in sales for Gage Roads-branded beers, while contract brews declined by 13 per cent.

In FY2016, Gage Roads produced 11 million litres of beer, 2.5 million litres of its own brands, and the remainder contract brewing.

A highlight for the year was Gage Roads’ newest beer, Little Dove New World Pale Ale, winning champion Australian beer at the recent Australian International Beer Awards.

Mr Hoedemaker said the award was an indication that recommitting to brewing high-quality craft beer was a winning strategy in today’s beer market.

 “We launched the new five-year operational strategy earlier this year, underpinned by the rapidly growing demand for high quality craft beer in Australia,” he said.

“The final piece in rolling out the strategy was achieving independence and the proposed transaction we announced today gives Gage Roads that flexibility and capacity.”