BUD Buys Goose Island

Anheuser-Busch InBev (BUD - Snapshot Report) U.S. unit has announced that it will acquire craft brewer Fulton Street Brewery LLC, the Chicago-based maker of Goose Island brews such as Honkers Ale, for a total $38.8 million.

The deal mentions that out of the $38.8 million, Anheuser-Busch will have to pay $22.5 million to Fulton Street Brewery and $16.3 million to Craft Brewers Alliance Inc. (HOOK) a publicly traded brewer based in Portland, each having a 58% and 42% stake, respectively.

Goose Island’s legal name is Fulton Street Brewery LLC, and is the owner of 312 Urban Wheat Ale, among other brands. In order to fight the competitive challenges of the beer industry, Goose Island entered into an equity agreement with the Widmer Brothers Brewery and the Craft Brewers Alliance, which has ties with Anheuser-Busch InBev.

After inking the deal with the two giant brewers in 2006 Goose Island has improved both in terms of efficiency and creativity. The company has introduced Sofie, Fleur, Juliet, Madame Rose, Pepe Nero and Nightstalker, as well as a number of variations of Bourbon County Stout.

As part of the deal, Anheuser-Busch will also invest $1.3 million in the Fulton Street brewery to increase production capacity. Goose Island sold approximately 127,000 barrels of beer in 2010. Industry analysts feel that the deal comes with Anheuser-Busch’s eagerness to focus on a few core brands, including the Blue Moon-killer Shock Top while purchasing a handful of successful craft brewers.

Management of Goose Island reveal that the demand for their beer has exceeded the capacity to serve the wholesale partners, retailers, and beer lovers. They also feel that this agreement helps achieve the company’s goals with an ideal partner. The deal comes at a time when craft beer sales have surged, while major brewers’ sales by volume have been flat or toppled. Big brewers have been hoping to tap ‘craft beers’ growth without alienating drinkers who prefer craft brews to more mainstream ones.

Anheuser-Busch InBev currently enjoys a Zacks #3 Rank with a short-term ‘Hold’ rating.

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