Gage Roads Brewing Announces Regarding Strategic Acquisition and Capital Raising

Gage Roads Brewing Co Ltd announced that it has executed a binding agreement to acquire 100% of the shares in Matso’s Broome Brewing Pty Ltd for $13.25 million plus deferred consideration of up to an additional $2.8 million in cash or scrip subject to the achievement of performance criteria over a 3-year period.

The Company will undertake a $10 million placement to institutional shareholders and a $2 million share purchase plan as part funding of the transaction.

Gage Roads advises that the current trading halt in the Company’s securities will remain in place pending an announcement in relation to the completion of the institutional placement.

BACKGROUND ON MATSO’S

Matso’s is an iconic West Australian flavoured beer brand owned by the PeirsonJones family in Broome. The brand is best known for its popular Ginger and Mango beer varieties. Originating in Western Australia’s pearling town Broome, Matso’s has become the leading nationally distributed alcoholic ginger beer and flavoured beer brand of Australia.

Matso’s took its name from Matso’s General Store, which was run by the Matsumoto family in the 1950’s. Now the former store houses the Matso’s brewery and pub which is a major Broome attraction.

By 2007, national demand for the refreshing Kimberley inspired beers had grown beyond the original venue’s brewing capacity and almost all of the products have since been produced at Gage Roads’ Palmyra plant with volumes growing to two million litres per annum.

Matso’s Ginger Beer has the largest market share of the alcoholic ginger beer category and is outperforming category growth of 13% per annum.

STRATEGIC RATIONALE

Acquiring the Matso’s brands is a natural accelerant of the 5-year proprietary brand strategy (as depicted below and previously disclosed in the Company’s 2017 Annual Report). At its core, this strategy seeks to deliver further improved margins and sustained earnings growth through the shift in sales mix towards higher-margin Gage Roads owned products.

The acquisition represents a major expansion of the Gage Roads brand portfolio. The additional Matso’s brands at current volumes and strong profit margins provide Gage Roads the opportunity to leverage its existing national sales, marketing and distribution capability and deliver sustained earnings growth. Our history and knowledge of the Matso’s brands and existing production capability minimises integration and sales risks allowing the incremental margins to truly flow through to and complement existing earnings in full.

With Gage Roads’ strength of people, sales, marketing and distribution expertise we anticipate outperforming current volumes and growing the Matso’s brands to their full national potential.

TRANSACTION FUNDING

Gage Roads has today launched an institutional placement of 117.65 million ordinary shares at an issue price of $0.085 per share to raise $10 million. Argonaut Securities is acting as lead manager and sole book runner. Argonaut has also acted as Gage Roads’ Corporate Advisor to the acquisition.

In addition, Gage Roads will offer a Shareholder Purchase Plan (SPP) at the same price as the institutional placement to raise a maximum of $2.0 million. The Company will offer eligible shareholders with registered addresses in Australia or New Zealand as at 4.00pm Perth time on 7 June 2018 (the Record Date) an opportunity to participate in the SPP allowing them to acquire up to $15,000 in new GRB shares. The SPP will be subject to a scale back at the discretion of the directors.


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