Full Sail Brewing acquired by Encore Consumer Capital

Last week we reported that Full Sail Brewing was entertaining a buyout offer. Today we learned that the deal went down and Full Sail agreed to accept the offer. Upon advice from the company’s leadership, the owners (the employees) voted to accept the offer from Encore Consumer Capital, a San Francisco-based investment firm. See our previous post for more details about the deal.

Two things make this a particularly interesting acquisition story. First, Full Sail is (was) owned by the employees by virtue of an ESOP (Employee Stock Ownership Program), so this was the employees’ decision. Second, it wasn’t Anheuser-Busch or another brewery seeking to acquire Full Sail: it was an investment group with no direct ties to the beer industry.

The name of the company that bought Full Sail is Oregon Craft Brewers Co. It is described as a company comprised of a group of local Oregon investors and Encore Consumer Capital. Details about the investors, along with the financial nitty-gritty, remains confidential, so who knows what “a group of Oregon investors” actually means. Forming a company called Oregon Craft Brewers certainly helps make an otherwise unsavory takeover sound more palatable.

“The votes were returned confidentially to our ESOP attorney. It passed nearly unanimously,” said Full Sail founder and CEO Irene Firmat, according to a report on The New School beer blog (read the story on The New School blog).

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According to The New School, Firmat said, “The employee vote was not a sure deal. Jamie [Executive Brewmaster Jamie Emmerson] and I don’t have a majority position. So even though we felt that this was a very good offer for all our shareholders, it was not a sure thing until the votes were counted. We did an early reveal because once notices went out to 78 employees, we thought confidentiality would be difficult to maintain and it would be better to have the facts out to minimize speculation.”

As was reported last week, Firmat and Emmerson, who serve as the ESOP’s trustees, recommended that Full Sail employees accept the offer.

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Although Firmat and Emmerson did not have a majority position, they possessed a substantial portion of the shares and wouldn’t have needed anything close to a unanimous “yes” vote for the takeover to be approved. In fact the deal could have been accepted regardless of how the 78 employee-owners voted.

Encore Consumer Capital describes itself as “an innovative private equity firm built specifically to help consumer products companies grow. The firm invests exclusively in leading consumer products companies to utilize its own consumer experience and the expertise of its operating partners at Encore Associates, a leading strategic advisory firm to the consumer products industry, to accelerate their growth.”

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The company has a track record of purchasing companies and then selling them to large players in related industries. For example, they acquired Aidell’s Sausage for $37 million* in 2007 and then sold it to Sara Lee in 2011 for $87 million.

Is that what’s in store for Full Sail? Will they simply get the brewery’s ducks in a row and then sell it to Anheuser-Busch or Miller-Coors? That would seem a predictable exit strategy for Encore, though it likely won’t happen immediately or easily.

“It is what they do, but they have a track record of holding on to companies for a longer period of time and in the meantime they invest to grow it,” Firmat told The New School. “Our distributor alignments make a purchase by a big brewer very difficult and more expensive and they are very aware of that.”

As far as the company’s immediate future is concerned, Firmat said, “We have committed to stay a year to insure that this transition goes smoothly. After that we will see.”

For now, Full Sail employees get a payout and retain their jobs. This outcome is probably a lot more enjoyable than what Elysian Brewing employees went through when Anheuser-Busch acquired the company in January. Elysian’s employees didn’t lose their jobs, but simply woke up one morning to discover that they were Anheuser-Busch employees.

* Private Equity at Work – When Wall Street Manages Main Street. Rosemary Batt, Eileen Appelbaum.

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