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Mighty Craft says “cheers” to transformational Adelaide Hills Group acquisition

The acquisition is expected to result in Mighty Craft’s spirit production capacity growing to 1.5 million bottles in FY22, making MCL one of the largest independent Australian craft spirit producers.

Mighty Craft Ltd has entered into a binding agreement to acquire 100% of Adelaide Hills Group for aggregate consideration of $47 million
The combined group is expected to deliver $78.7 million revenue in FY22.

Mighty Craft Ltd (ASX:MCL) has entered into a binding agreement to acquire 100% of Adelaide Hills Group for aggregate consideration of $47 million, creating one of the largest craft spirit producers in Australia.

The company believes the acquisition is transformational with the combined group expected to deliver $78.7 million revenue in FY22 along with $6 million of EBITDA (excluding transaction costs).

This acquisition comprises:

  • 100% of Mismatch Brewing Company Pty Ltd;
  • 100% of MK Wine Solutions Pty Ltd (Hills Cider Co);
  • 100% of The Hills Distillery Pty Ltd, and
  • 75% of the shares in Lot 100 Pty Ltd.

According to the company, the acquisition will align it to become a leading player in the craft whisky market in Australia and will strengthen its geographic and product footprint with the addition of multiple award-winning growth brands across key craft segments.

The move also enables economies of scale through the acquisition of quality, efficient and cost-effective production facilities, as well as providing a platform for earnings growth.

Strengthens MCL market position

Mighty Craft’s managing director Mark Haysman said: “Both Mighty Craft and the Adelaide Hills team are passionate about creating and growing, at scale, local craft beverage brands.

“The combination of the two businesses is expected to see Mighty Craft’s forecast consolidated revenue for FY22 to grow by 57% to $78.7 million with forecast underlying EBITDA in FY22 expected to be $6.0 million including synergies.

Significant synergies

The acquisition is expected to result in Mighty Craft’s spirit production capacity growing to 1.5 million bottles in FY22.

Haysman said: “This increased scale and the opportunity to realise significant synergies will truly leverage our operating platform and enhance Mighty Craft’s ability to accelerate the growth of new and existing craft businesses.”

Retaining key personnel

The resulting enlarged craft beverage portfolio will create immediate cross-network opportunities and synergies and bring scale to transform profitability in the Mighty Craft model.

As part of the acquisition, AHG’s key management personnel will be retained as they continue to drive growth for all the AHG brands

Haysman said: “A key ingredient to achieving our objective is having the talented and highly specialised production and management team from these four fantastic businesses come to join us at Mighty Craft to help integrate the brands, from a production, distribution, sales and marketing perspective, into the Mighty Craft portfolio.”

Funding the acquisition

The company is funding the acquisition through cash consideration of $27 million while the remaining $20 million will be paid through consideration shares to be issued to the sellers of AHG at a deemed issue price of $0.35 per share.

Mighty Craft is undertaking a capital raising initiative to raise around $29 million comprising a fully underwritten institutional placement of approximately $11.3 million at $0.32 per share.

The company is also launching a fully underwritten non-renounceable entitlement offer to raise around $17.7 million and has also secured additional debt of $6 million using its existing debt facility with Pure Asset Management.

Approximately 90.625 million new shares in Mighty Craft will be issued under the fully underwritten placement and entitlement offer at $0.32 per share and will represent approximately 30% of Mighty Craft shares on completion of the acquisition.

The company also intends to use the proceeds from the placement and entitlement offer to fund part of the cash consideration for the acquisition of AHG and to fund whisky acceleration, capex, working capital and transaction costs.

“Excited to join forces”

AHG’s Toby Kline said: “We are very excited to join forces with Mighty Craft to work towards our mutual ambition to become Australia’s leading craft beverage company.

“Our shared cultural values, vision and entrepreneurial and innovative approach to growing craft beverage businesses make Mighty Craft a highly compatible fit for our brands and our people.

“We have joined forces because we believe the two businesses are stronger together and can really create something special over the coming year.”

Quick facts: Mighty Craft Ltd

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