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Three Game-Changing Distrib Transactions, Says Bill Anderson; “New Waves Of Capital” Comin’

INSIGHTS Express:

So far in 2010, 3 game-changing distributor transactions announced, says First Bev Capital’s Bill Anderson at NBWA convention. The first, Ia Coke bottler Chesterman’s acquisition of 2 AB distribs, admittedly not approved and Bill didn’t even really deal with its implications. But it would be without any known precedent in AB system, we believe. The 2d transaction: McLane’s (a division of Berkshire Hathaway, Warren Buffett’s co) bought Ga wine and spirits distrib Empire. Alc bev distribution “very attractive” to Warren, sez Bill (whose co advised sellers in the transaction) as “he loves things that are this stable.” And the 3d game-changing transaction, according to Bill, is Byron Trott’s BDT Capital purchase of 70% of Soave Enterprises City Bev in Chicago. Bill characterized this as a “black swan” event (as in the book of same name), that is, one far outside of normal expectations. For AB to buy 70% of City it didn’t own or someone in AB distrib family to buy 70% or whole thing, or even Soave to have bought AB’s 30%, all these would have been “reasonable expectations.” But as a $2 bil private equity fund, BDT Capital enters this transaction with a “very different set of business strategies.”

And so perhaps we are on cusp of change in distrib deal financing. “There can’t be the amount of consolidation that suppliers want with the existing capital structure,” sez Bill. The industry will need “new waves of capital to effectuate that change. Without a doubt, another wave of new money” will be coming in to beer biz. He talked of private equity funding that would have much longer-term timeframe and lower expectations of returns, dubbing that “private equity lite.” There was also some discussion of the possibility (which some deemed a probability) of “public money” in distribution sector in next few years. Currently, AB and MC don’t allow that. But of course, Warren Buffett’s Berkshire Hathaway is a public company. It is very interesting how much his name keeps poppin’ as a possibility these days. Tho Byron Trott is Buffett’s “most beloved banker,” word is he is not a participant in the City Bev transaction.