DOJ approves beer merger; Kona Brewing Co.’s Hawaii operations to be sold

  • Crews work on the 30,000-square-foot Kona Brewing Co. facility on Monday. Craft Brew Alliance has agreed to sell Kona Brewing Co.’s Hawaii operations in order to pave the way for the purchase of the alliance by beer giant Anheuser-Busch. (Chelsea Jensen/West Hawaii Today)

Craft Brew Alliance has agreed to sell Kona Brewing Co.’s Hawaii operations in order to pave the way for the purchase of the alliance by beer giant Anheuser-Busch.

The Department of Justice’s Antitrust Division approved on Friday the acquisition of Kona Brewing Co. operations in the Aloha State by PV Brewing Partners, a Delaware limited liability company with headquarters in Overland Park, Kansas.

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The approval came the same day the department filed a civil antitrust lawsuit in U.S. District Court for the Eastern District of Missouri to block the $220 million merger of Craft Brew Alliance and Anheuser-Busch announced back in November. Also filed was a proposed settlement, which if approved by the court, would resolve the competitive harm alleged in the lawsuit.

According to the department’s complaint, Anheuser-Busch Companies’ acquisition of Craft Brew Alliance likely would substantially lessen head-to-head competition in Hawaii between Anheuser-Busch brands, such as Stella Artois and Michelob Ultra, and Craft Brew Alliance’s Kona brand.

If the transaction was allowed to proceed, Anheuser-Busch and Craft Brew Alliance would have a combined share of approximately 41% of Hawaii beer’s market. That, according to the department, could impact future competition because absent the merger, the companies would continue to invest and compete against each other for premium beer sales in the state.

“This merger, as originally structured, would have significantly increased market concentration in Hawaii and eliminated the growing competition between ABI and CBA brands,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. The “settlement with its divestitures will ensure that consumers continue to benefit from this competition today and into the future.”

Specifically, the settlement requires the sale of the Kona brewing facilities, including the under-construction 30,000-square-foot, 100,000-barrel capacity brewery in Kailua-Kona; the granting of a perpetual, exclusive license of the Kona brand for the brewing, distribution, and sale of Kona beer in Hawaii as well as other assets, rights, and interests necessary to ensure that PV Brewing Partners is able to compete in the Hawaii beer market using the Kona brand.

The arrangement does not include Craft Brew Alliance’s Kona business outside of Hawaii.

“This latest milestone brings us one step closer to officially joining the Brewers Collective family,” said Andy Thomas, CEO of Craft Brew Alliance, which purchased Kona Brewing in 2010 for $18 million. “We look forward to combining our resources, talented teammates, and dynamic brands as we continue nurturing the growth of CBA’s existing portfolio and investing in innovation to meet the changing needs of today’s beverage consumers, all while delivering certainty of value to our shareholders.”

PV Brewing Partners is a firm formed by David Peacock and VantEdge Partners, an investment firm based in Kansas City, Kansas, led by Paul Edgerley and Terry Matlack.

VantEdge, among other investments, owns 260 restaurants, including Dunkin’, Taco Bell and Jamba, and is part of the investment group that owns the Kansas City Royals. Peacock is the former president of Anheuser-Busch.

“In the same way that CBA carried on the legacy of what Cameron Healy and Spoon Khalsa built at Kona, our number one priority is supporting Kona’s future on the Islands and ensuring the success of the brand there,” Peacock said in June.

“We are energized by this unique opportunity and are proud to support the continued growth of Kona in Hawaii with a new state-of-the-art brewery.”

Kona Brewing General Manager Billy Smith said Monday it is very exciting time for the company started back in 1994 in Kailua-Kona.

“For years, our team across the islands has ranged from our brewers, to restaurant workers, administrative personnel, sales and marketing staff, all of us have called Hawaii our home. Our newfound independence will allow us to put more focus on our fans and communities throughout Hawaii while also being able to brew fresh beer in Hawaii that is world-class,” he said. “The announcement does not change what we are working on or the way we have grown accustomed to working in Hawaii. We’re still working diligently to finish the construction of our new brewery and expect it to be online before the end of the year.”

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In accordance with the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register kicking off a 60-day comment period.

Following the comment period, the U.S. District Court for the Eastern District of Missouri may enter the final judgment upon finding the settlement is in the public interest, according to the Department of Justice.

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