Deal 'saves' Redhook
A-B, Washington brewery restructure distribution agreement
May 19, 2004 - Redhook Ale Brewery and Anheuser-Busch have restructured their distribution agreement, ending concerns about the future of the microbrewing pioneer from Washington.
Under the new 20-year agreement, Anheuser-Busch's stake in Redhook will rise from 29.8% to 34%. Redhook also will pay Anheuser-Busch more to distribute its products, and it will pay $2 million in cash before Dec. 1.
In the new deal, Redhook does not have to buy back Anheuser-Busch's $16.3 million in preferred stock, which the beer giant bought in 1994 when the two breweries entered their agreement.
"This is a good deal," President and Chief Executive Paul Shipman told Redhook shareholders at the company's annual meeting. "Anheuser-Busch gets a broader array of products to sell, and it gives us national distribution, which is becoming more of an asset."
Anheuser-Busch has distributed Redhook beer across the country since 1994. Either company could have terminated the agreement by the end of this year. The beer giant handled 95% of Redhook's 2003 sales: 72% through the distribution alliance and 23% through other Anheuser-Busch wholesalers.
In the company's annual report in March, Redhook's auditors warned that the brewery would have trouble surviving if Anheuser-Busch terminated the agreement. Redhook would have defaulted on its loans and would have had to buy back Anheuser-Busch's $16.3 million in preferred stock, the auditors said.
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