C&C deal with Pabst Brewing Company could lead to sale of US operations

Irish drinks group C&C has signed a new distribution deal which could, ultimately, lead to the sale of its US operations.

The agreement — via C&C’s US subsidiary, the Vermont Hard Cider Company — is with the Los Angeles-based Pabst Brewing Company (PBC), which ranks as the world’s largest American-owned brewer.

PBC will — as of the beginning of March — have the exclusive American rights to distribute, market and sell all of C&C’s US cider brands and its imported brands, such as Magners and Blackthorn.

The terms of the deal also include a long-term option for PBC to buy C&C’s US cider brands and related assets, subject to regulatory approvals.

While any amount paid would be determined if and when the option is exercised, C&C said it would, at least, be consistent with the current carrying value of the assets.

Davy Stockbrokers estimates the value to be around €150m.

“Given that Pabst has a long-term option to acquire C&C’s US cider brands and related assets, it has the potential to underpin the carrying value of C&C’s US business,” Davy’s Declan Morrissey said.

C&C, however, is currently talking down the potential disposal aspect of this deal, with management yesterday stressing it affords the group the best partner with which to capitalise on the potential of the US market, in which it has underperformed of late.

“We expect cider’s share of beer to grow double digits and to reach 3% over the next five to seven years.

We have a truly unique asset in the US market, with our Vermont cidery, and are very proud of the heritage and craftsmanship behind our domestic and imported cider brands,” C&C’s chief executive, Stephen Glancey said.

“PBC is a leading player in the US LAD [long alcoholic drink] market and the strength of their portfolio and market access will help us strengthen our position in the US cider category,” he added.

Just over a month ago, when reporting a disappointing set of first half results, C&C’s management said that while there is no emotional attachment with any one brand, and disposals would be considered if and when necessary, now would not be the right time to sell out of the US, even if that were the plan.

US hedge fund operator, Orange Capital — which recently emerged as an activist investor in the group, with a 5% stake — recently called for C&C to raise more debt to fund further share buybacks, exit the US, row back on international expansion and focus on its core Irish and Scottish operations.

C&C’s shares were up nearly 2% yesterday.