Ontario cannabis company Aphria has reached a deal to acquire Atlanta, Georgia-headquartered SweetWater Brewing Company for $300 million in cash and stock.
The transaction was announced today during a conference call held at, appropriately, 4:20 p.m. EST.
SweetWater will become a wholly owned subsidiary of Aphria, a publicly traded company on the NASDAQ that produces “pharmaceutical-grade medical cannabis.” Shareholders of Sweetwater will receive $250 million in cash and about $50 million Aphria stock upon closing. Those shareholders are also eligible to receive as much as $66 million of additional cash under an earnout through the end of calendar year 2023.
Aphria said the transaction value represents about 12.5x adjusted EBITDA multiple.
Aphria, which was founded in 2013, said its board of directors unanimously approved the acquisition, which is expected to close by the end of December and be immediately accretive to EBITDA and diluted earnings per share.
In a press release announcing the transaction, Aphria pointed to SweetWater’s flagship 420 Pale Ale as aligning with the “cannabis lifestyle” and “provides a scalable platform for expansion into the U.S. and Canada.” This marks Aphria’s first foray into beverage alcohol and the U.S. market.
“Our strong balance sheet and access to capital have enabled us to enter the U.S. through this strategic and accretive acquisition,” Irwin D. Simon, Aphria’s chairman and CEO, said in a press release. “We look forward to building upon the strengths of each of our respective and complementary. We will establish and grow our U.S. presence through SweetWater’s robust, profitable platform of craft brewing innovation, manufacturing, marketing and distribution expertise. At the same time, we will build brand awareness for our adult-use cannabis brands, Broken Coast, Good Supply, Riff and Solei, through our participation in the growing $29 billion craft brew market in the U.S. ahead of potential future state or federal cannabis legalization.
“We look forward to building upon the strengths of each of our respective and complementary brands, diversifying our product offering, broadening our consumer reach, and enhancing loyalty with consumers.”
SweetWater was founded in 1997 by Freddy Bensch and Kevin McNerney. In 2014, the company sold a minority stake in the business to private equity firm TSG Consumer Partners.
“We are excited to welcome Freddy and the entire SweetWater team to the Aphria family,” Simon said. “As a purpose-driven company, Aphria takes great pride in leading with our core values and is committed to changing people’s lives for the better by investing in our products, our people and our planet – a sentiment SweetWater completely shares with us.”
“We are excited by the opportunity to join a leading global cannabis company and build a successful future based on the strengths we both bring to this combination,” Bensch added in the release. “Our 420 brand offerings and SweetWater 420 Fest complement Aphria’s cannabis business and create mutual opportunities for accelerated expansion into other cannabis- and beverage-related products in the U.S. and Canada. We will leverage our growing beverage offering and build an even stronger, more diversified company with a continued focus on authentic and distinctive brands using some of the freshest, most flavorful ingredients to create innovative and high quality beverages including beers, seltzers, spirits and non-alcoholic beverages that our loyal and growing consumer base has come to expect from SweetWater.”
SweetWater ranked as the 14th largest domestic craft brewer by volume in 2019, according to the Brewers Association. Sweetwater produced 261,00 barrels, an increase of 7% that year. The company generated net revenue of $66.6 million and adjusted EBITDA of $22.1 million in 2019.
Look for more tomorrow.