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KPS Closes Tab With NAB, Sells Brewer For $388M

The Wall Street Journal:

By Michael Wursthorn

KPS Capital Partners is enjoying its last few sips of North American Breweries Holdings LLC, the beer maker behind brews such as Labatt and Magic Hat.

The buyout firm on Friday agreed to sell NAB to Cerveceria Costa Rica SA, a unit of Florida Ice and Farm Co., for $388 million, netting the firm a more than nine-times return on its investment, according to a person with knowledge of the matter.

KPS moved to close its tab with NAB after spending the last nearly four years consolidating several beers under the NAB banner, which all began with the acquisition of Labatt brands from Anheuser-Busch InBev in February 2009 for an undisclosed sum.

“NAB didn’t exist four years ago,” said KPS Partner Raquel Palmer. “Now, it’s the third largest beer company in the U.S. based on companies that brew beer and the sixth largest based on companies that sell beer.”

Rochester, N.Y.-based NAB’s other brands include Genesse, Pyramid and Honey Brown Lager.

Despite this exit, private equity still has a thirst for beer.

The interest appears to be mostly fueled by craft beers, a high growth market in the U.S., according to Bill Anderson, chief executive of First Beverage Group, a financial services firm focused on the beverage industry.

In September, Fireman Capital Partners acquired a majority interest in Utah Brewers Cooperative, which is behind the Squatters and Wasatch brewery and brew pubs, for a reported $35 million. Earlier this year, Sage Capital acquired a 60% stake in Saint Louis Brewery Inc., the brewer of Schlafly Beer. That investment was likely between $2 million and $7 million, Sage’s typical equity contribution range.

“Private equity is interested in the very high growth rates that U.S. craft beers are seeing right now,” Mr. Anderson said. “This is where their business management skills and capital can come in and help accelerate that growth even further.”

Last year, the craft beer industry, which includes brews like Magic Hat and Schlafly, grew 13% by volume and 15% by retail dollars, according to industry-trade group Brewers Association. Meanwhile, the U.S. beer market overall fell 1.3%, the trade group said.

Still, the craft beer market of roughly $8.7 billion is dwarfed in size by the overall beer industry, which stands at $96 billion, according to Brewers Association.

Nonetheless, with outside returns like the one KPS received for NAB,  private equity is likely to continue stepping up to the bar.

Write to Michael Wursthorn at Follow him on Twitter at @4BetterOrWurst.