Anchor Steam Beer Snapped Up by Japan's Sapporo in U.S. Push

(Bloomberg) -- Anchor Brewing Co., a century-old San Francisco brewer that helped pioneer the craft-beer movement, will be acquired by Sapporo Holdings Ltd., part of a push by Japanese beverage companies to seek growth on U.S. soil.

The business, best known for Anchor Steam beer, fetched about $85 million in the transaction, which is slated to close by the end of the month.

The deal reflects mounting pressure by craft brewers to find deep-pocketed partners as they face an increasingly crowded market. For Sapporo, the challenge is coping with a slowdown in its home country. Beer consumption in Japan has been on a steady decline in the last decade as the number of young people reaching drinking age shrinks.

The Anchor purchase also helps open more channels to sell existing brands. Until now, the company has sold beer in the U.S. that was made in Canada, Sapporo Holdings President Masaki Oga said in a briefing with reporters Thursday.

“With the Anchor acquisition, we will have the capability to make and distribute beer in the U.S.,” said Oga, who took the helm at the beginning of this year. “We will also speed up expansion of Sapporo premium beer.”

Sapporo, Japan’s fourth-largest brewer, operates six beer factories in its home country and three in North America. That includes Canada’s Sleeman Breweries Ltd., which it acquired about a decade ago.

Gaining Cachet

Anchor Brewing is the 22nd-largest craft brewer in the U.S. by sales volume, according to figures released by the Brewers Association in March. It has one production plant in San Francisco and posted annual sales of about $33 million in 2016, according to Sapporo.

That’s a tiny fraction of the Japanese brewer’s sales, which amounted to 541.8 billion yen ($4.9 billion) last year. But the deal provides the company with cachet and a bigger foothold in a key market.

Craft-beer deals had gotten frothy in recent years, but the M&A climate has cooled in 2017. That may have helped Sapporo get a better price with Anchor Brewing.

Sapporo is paying about 2.6 times annual revenue for Anchor, compared with the 8.7 times revenue U.S.-based Constellation Brands Inc. paid for craft brewer Ballast Point in 2015. That same year, a closely held Spanish brewer, Mahou-San Miguel Group, considered buying a minority stake in parent Anchor Brewers & Distillers LLC, weighing an investment of as much as $300 million, according to people familiar with the matter at the time.

Anchor Brewing was founded in 1896, and was rescued from closure in 1965 by Fritz Maytag, heir to the Maytag washing machine company. It was sold to the Griffin Group, an investment and consulting firm, in 2010.

The Anchor deal is the latest for Japanese brewers. In October, Kirin Holdings Co. acquired a stake of about 25 percent in Brooklyn Brewery for an undisclosed sum. Asahi Group Holdings Ltd., which has been on a buying spree that included purchasing about $11 billion of SABMiller Plc’s brands last year, said in July it planned to bolster its craft beer output to five times its current level.

Tom Russo, a partner at Gardner Russo & Gardner who holds about $800 million worth of Anheuser-Busch InBev stock and is Heineken Holding NV’s third-largest shareholder, expressed pessimism about the deal, saying Anchor isn’t as well positioned as micro-brewers to partner with restaurants.

“The Japanese brewers do not have a distinguished track record with regards to M&A outside of their home markets,” he said by phone.

Sapporo’s Anchor purchase is “likely a multistep approach in terms of craft,” said Bloomberg Intelligence analyst Thomas Jastrzab. “We’re seeing some consolidation within the craft beer market in the U.S. This may be the first of further acquisitions for them.”

--With assistance from Grace Huang and Thomas Buckley

To contact the reporters on this story: Jeff Sutherland in Tokyo at jsutherlan13@bloomberg.net, Lisa Du in Tokyo at ldu31@bloomberg.net.

To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net, K. Oanh Ha at oha3@bloomberg.net, Jonathan Roeder