From Little Things...

June 18, 2012, by Crafty Pint
From Little Things...

The Australian beer scene has woken to the news this morning that Lion has made an offer for Little World Beverages – known for brands such as Little Creatures, White Rabbit and Pipsqueak Cider – and that the board of Little World Beverages has recommended that its shareholders approve the offer. Lion, which was a foundation shareholder in the Fremantle based business and which currently owns 36.3% of the business, has made a substantial offer that will be formally presented to shareholders, with a meeting to approve the offer expected to be held in October.

The unsolicited offer from Lion was made to the Little World Beverages board at the end of last week, who met over the weekend and made their decision to recommend to shareholders late last night. It is a move that was expected, according to staff, but not necessarily this soon. Lion has committed to maintaining the operation of the Little Creatures brewery in Fremantle and Healesville’s White Rabbit brewery. Work will also continue on the new brewery development in Geelong.

On behalf of all the founding shareholders of LWB, directors Nic Trimboli and Howard Cearns released the following comment: "Lion has been a supportive shareholder from the beginning of the Little World journey. While in one sense we are sad to be at this point, we are gratified that the brands we have created will not only be preserved, but will be given the opportunity to achieve even higher levels of recognition and success that they deserve on the national and international stage. This outcome is a great credit to the management and staff that have contributed to the Little Creatures Brewing story."

The full media release concerning the planned acquisition reads:

Monday 18 June 2012: Lion confirmed today that it has reached an agreement with the Board of Little World Beverages to acquire the shares in Little World Beverages it does not already own by way of a Scheme of Arrangement ("Scheme"). Under the Scheme, Lion proposes to offer Little World Beverages shareholders $5.30 per share in cash ("the Offer") subject to the successful implementation of the Scheme.

The cash consideration of $5.30 per share will be reduced by the amount of any dividend declared by Little World Beverages prior to the Scheme becoming effective (the "Offer").

This Offer provides a highly attractive outcome to Little World Beverages shareholders. It values Little World Beverages at a total enterprise value of $381.6 million and represents:

  • a multiple of 23.1 times Little World Beverages FY11 EBITDA (Little World Beverages last published annual accounts) and 20.3 times Little World Beverages EBITDA for the 12 months to 31 December, which compares favourably with precedent transactions and sector trading benchmarks;
  • a 39.8% premium to $3.79 per share, Little World Beverages last ASX closing price on 15 June 2012;
  • a 45.0% premium to $3.65 per share, Little World Beverages one month volume weighted average ASX closing share price (VWAP) up to and including 15 June 2012;
  • a 44.9% premium to $3.66 per share, Little World Beverages three month (VWAP) up to and including 15 June 2012; and
  • a 49.6% premium to $3.54 per share, Little World Beverages six month (VWAP) up to and including 15 June 2012.

Rob Murray, Chief Executive Officer of Lion, said: "This is a very compelling offer for Little World Beverages shareholders and we are pleased the Little World Beverages Board has agreed to recommend it to its shareholders.

'Lion has a long history of supporting the Little World Beverages business and we believe there is now a fantastic opportunity through Lion's scale distribution system to get these great brands to more beer lovers, while respecting the craft brewing ethos of the Little World Beverages brands, breweries and hospitality venues.

"Lion has a strong record of nurturing and preserving the entrepreneurism that has made boutique beer and wine brands like James Squire, Knappstein, Petaluma and St Hallett great, and will continue to invest in the Little World Beverages brands in the same manner.

"Lion holds Little World Beverages' founders and management team in the highest regard. They deserve enormous respect for building Little Creatures into one of Australia's leading craft beer brands," said Rob.

The Independent Directors of Little World Beverages have confirmed that they intend to unanimously recommend that Little World Beverages non-Lion shareholders vote in favour of the Scheme and each of the LWB Directors intends to vote in favour of the Scheme in relation to the LWB shares held or controlled by them (which amount to approximately 35% of the total current LWB shares on issue), in the absence of a superior proposal and subject to confirmation by an independent expert that the Scheme is in the best interests of shareholders.

Conditions of Lion's Offer
The implementation of the Scheme is subject to a limited number of customary conditions, including:

  • issue of ASIC & ASX consents, waivers, modifications and approvals necessary to implement the Scheme;
  • approval from the Foreign Investment Review Board;
  • approval of the Scheme by Little World Beverages shareholders and the Court;
  • an independent expert (appointed by the Independent Directors of Little World Beverages) confirming that the Scheme is in the best interests of Little World Beverages shareholders; and other customary conditions such as no material adverse change in the Little World Beverages business.

Next Steps
A Scheme Booklet with full details of the Offer, including an independent expert's report, is expected to be dispatched to Little World Beverages shareholders in September 2012. The scheme meeting to approve the Scheme is expected to be held in October 2012.

Greenhill Caliburn is acting as financial adviser to Lion and King & Wood Mallesons is acting as its legal adviser.

About Little World Beverages

Little World Beverages is an ASX listed craft brewing company based in Fremantle, Western Australia. Lion was a foundation shareholder in the Little World Beverages business in 2000 with a 20% interest and, at the time of the initial public offering and ASX listing in 2005, had achieved an interest of 35%. Lion now holds 36.3%.

Little World Beverages key brands are Little Creatures, White Rabbit and Pipsqueak Cider. Little World Beverages operates one brewery in Fremantle, one in Healseville and has another brewery under construction in Geelong. It also operates three hospitality venues in Fremantle, Healesville and Fitzroy.

About Lion

Lion brings together great household brand names including Tooheys, Dairy Farmers, XXXX, PURA, Hahn, Berri, Speights, King Island Dairy, Boag's, Yoplait, Wither Hills and COON. Lion has a strong record in nurturing smaller premium brands without compromising entrepreneurialism or quality. Such brands include James Squire, Knappstein, Petaluma and St Hallett.

Lion believes business success comes from investing in its people and brands and by constructively engaging its stakeholders. Lion employs close to 7,500 people across Australia and New Zealand and delivers revenues in excess of AU$5 billion. In addition to direct employment, Lion makes a significant contribution to the Australian and New Zealand economies – it is one of the region's largest purchasers of agricultural goods and an integral component of the retail, hospitality and tourism industries.

So what is the initial reaction at The Crafty Pint?

Such moves are always going to be on the cards as the beer scene changes and the major multi-national breweries look for a way to have their slice of the steadily growing craft beer pie, particularly with sales of major brands falling. It has happened in the past and, in the States, where the craft beer scene is far advanced compared to Australia, major brewery acquisitions of successful craft breweries are taking place too – such as Anheuser-Busch InBev’s takeover of Goose Island. Only when the acquisition is confirmed will we see Lion’s intended direction for the beers and the brand, one which in the case of Little Creatures and, in particular, the Pale Ale has done wonders for the Australian beer scene. Whether those who have helped build the business stick around within the new structure will surely play a role too.

Of course, there will be those for whom provenance and ownership is all and others for whom the only judgement that matters is how a beer tastes from a glass. For the former, they have a growing number of independent and high quality local craft brewers' offerings to choose from. For those in the latter camp, if Creatures Pale continues to taste as good as it does and the hospitality at the Dining Hall and home base in Freo maintains its standards, will they care about Lion’s 100 per cent ownership?

From a personal point of view, The Crafty Pint has a huge amount of time and respect for those involved in taking Little Creatures and, more recently, White Rabbit and Pipsqueak to where they are now in such a short space of time. For a brand that is relatively omnipresent, they remain a small operation in terms of staffing, one that retains a welcoming and highly personable approach. Through their support for the first two Good Beer Weeks, at a time when many others in the industry were perhaps waiting to see what those of us creating the festival would deliver, they indicated a willingness to back people operating at the real grass roots level of the beer industry – such decisions don’t happen by accident. As long as that ethos – as well as the quality of their Pale Ale, of course! – can survive the likely acquisition, Lion’s move should prove easier for most to swallow.

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