Bottoms Up

Beer and wine in the Bay Area and beyond

Update: Former Pyramid CEO now Magic Hat CEO, snags Pyramid

By William Brand
Tuesday, April 29th, 2008 at 10:23 pm in Uncategorized.

By William Brand, STAFF WRITER
In a move that surprised almost everyone, Magic Hat, an East Coast craft brewer noted for its eclectic beer styles is buying Seattle-based Pyramid Breweries and taking it private in a deal worth $25 – $30 million.
Pyramid’s major brewery is in Berkeley. The company also has an adjacent alehouse restaurant and a brewpub-alehouse in Walnut Creek, an alehouse in Sacramento, alehouses in Portland and Seattle and a brewery, the former Portland Brewing, in Portland.

The merger, to take effect in August, would create one of the largest craft breweries in America. Magic Hat Chief Executive Officer  Martin Kelly, who was Pyramid’s president and CEO in the early 1990s said his company approached Pyramid with the offer. He became chief executive at Magic Hat, which is located in Burlington, Vt., not long after it opened in 1994.

Eventually, there is a possibility that Magic Hat beers may be brewed in Berkeley and Pyramid beers, including its best-selling Hefeweizen, will be brewed in Burlington, the companies said. However such a decision has not been made, an official said.

Pyramid is one of America’s craft beer pioneers, a merger of two breweries that opened in the Seattle area in the early 1980s. It is also one of the few publicly traded craft breweries in America and has been a consistent money loser.  Magic Hat, which company officials said, has backing from Basso Capital Ventures, will  pay stockholders $2.75 a share.

“The craft beer category has a great track record and room for lots of future growth,” Kelly said. “We feel we can retrain what is special and unique with each business and without the added burden of being a public company, Pyramid can become profitable,” he said. Pyramid Chief Executive Officer Scott Barnum said  the deal includes assumption by Magic Hat of a significant amount of Pyramid debt. Pyramid shares (PMID) closed Tuesday at $2.52, on volume of nearly 900,000 shares, up from an average daily volume of about 7,000 shares.

The deal makes sense; it’s good synergy, Barnum said.

“Pyramid’s big sellers are unfiltered wheat beers; Magic Hat makes interesting and funky ales, including a very good IPA.”

The deal gives the merged company national reach, Barnum said, and prepares both companies for the future with its anticipated relentless competition from larger breweries.

Tom Dalldorf, publisher of the Celebrator Beer News, a national publication based in Hayward covering the craft beer industry, said the deal surprised him and everyone he knows in the business.

“Alan Newman, the owner of Magic Hat, is not your archetypical brewery owner,” Dalldorf said. Magic Hat beers are unknown out here, he said. “They have a best-seller called #9, another called, I believe, Monkey Boy. They’re all curiously named.”

“I’m bewildered by this, it makes me dizzy, ” Dalldorf said.Pyramid  made just over 200,000 barrels of beer last year, ranking it about the 7th largest craft brewer. Magic Hat, founded in 1994, is growing rapidly. Production in 2007 jumped 30 percent to 102,000 barrels, making it the 13th largest, according to the Boulder, Colo.-based Brewers Association.

Staff Writer William Brand  covers beer and brewing. Contact him at bbrand@bayareanewsgroup.com or 510-2080-6454.

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