Rebel Brewdog edges closer to corporateland as private investor injects £100m ahead of listing

Scottish craft brewing giant Brewdog has paved the way to becoming a listed business within the next three years after securing a private equity cash injection that has valued the Aberdeenshire firm at £1 billion.

San Francisco-based TSG Consumer Partners has paid £213 million for a 22.3 per cent stake in the Ellon-based business.

In total around £100m of TSG’s investment will be used to fund expansion projects, with the remainder being used to buy out some of the shares held by BrewDog chairman James Watt, his co-founder Martin Dickie and other directors.

The largest payout of more than £50m is going to Mr Watt, who said Brewdog “would look to list in four or five years’ time” following the deal.

His shareholding in the business has now reduced from 35 per cent to 25 per cent, with Mr Dickie, whose position has reduced from 30 per cent to around 22 per cent, receiving a slightly smaller cash sum than his partner.

A further £13m, meanwhile, has been set aside to allow the company’s so-called ‘equity punk’ investors who bought shares through four crowdfunding rounds that have hitherto been at the centre of the firm’s self-styled alternative rebellious anti-corporate identity.

The new deal will see punk investors offered the chance to sell up to 15 per cent of their equity, capped at 40 shares, to TSG.

The exact terms of that offer will be forwarded to shareholders this week, the firm said.

However, Mr Watt has said that those who invested in the earliest financing rounds will benefit from the company’s valuation increasing by 2,756 per cent in the intervening period, from £26m to £1bn.

In addition, small investors from the latest fundraising round held last year will be able to sell part of their stakes at returns that Watt said would be nearer 180 per cent.

One representative from TSG will also be joining the Brewdog management team despite one not actually existing to date in the formal model of a board of directors.

“We don’t have one as yet,” Watt said. “We have been pretty informal up to this point.”

Once installed, the TSG representative will hold a position of a non-executive director.

The American private equity house has also been issued with preference shares entitling it to a compounded return of 18 per cent a year on exit.

This concession will not be extended to existing small investors and each existing share has now been diluted to 10, with the subsequent effect of reducing the value per share.

While Mr Watt said that the company had received “overwhelming” support for the plan at a general meeting held in March, he admitted that just 116 of BrewDog’s 32,000 equity punks cast a vote, 16 in person and 100 by proxy.

Despite this, he said the company remains committed to the crowdfunding model and would seek to raise further capital from equity punks in future.

“That community element is key to the business and we want to continue to build that community in the UK and internationally,” he said.

“A lot of the other investors saw our equity punk element as a nuisance but it’s the heart and soul of our business and TSG completely bought into that.”

Following the fresh cash injection, Brewdog, which made £7m pre-tax on £71m of revenues last year, said it now aims to more than double its total production capacity from 650,000 to 1.5 million hectolitres.

This will include expansion at its headquarters in Ellon on the outskirts of Aberdeen – where headcount is expected to rise by 50 to roughly 320 by the end of this year – as well as the opening of its first US brewery in Columbus, Ohio, within the “next few weeks”.

In total, Mr Watt said employee numbers at BrewDog should rise from 800 to 1,000 by the end of this year.

He added: “The TSG deal enables us to take our five-year business plan and do it in two years.”

That plan includes the construction of a £5m hotel next to BrewDog’s Ellon brewery that is expected to create 80 jobs in the local area. Although the proposal has been mired in controversy after the beermaker fell out with Aberdeenshire Council over the price it was charging for the land, Mr Watt said they are getting close to inking a deal.

“We’ll hopefully have good news on that in the next few weeks,” he said.

Other plans include the launch of between five and ten “mini-tap room” bars in both the UK and the US, with each costing in the region of £1m to £1.5m, a hotel in the US, a waste water treatment plant in Scotland and breweries in Asia and Australia.