Carlsberg is buying Canada’s Waterloo Brewing for $144-million

As part of its contract manufacturing business, Waterloo Brewing has already been producing Carlsberg’s Somersby Apple Cider for the Canadian market since 2019.ANDREW KELLY/Reuters

Danish beer giant Carlsberg Group CABGY is buying Canada’s Waterloo Brewing Ltd. WBR-T for $144-million, the companies announced late Wednesday.

The $4-per-share all-cash deal, which represents a 19.4-per-cent premium to Waterloo’s Dec. 14 closing price, is by far the largest deal to buy a Canadian brewery in recent history. Waterloo, founded in 1984 as Ontario’s first craft brewery and based in Kitchener, Ont., produces Laker beer, LandShark Lager, various Seagram’s-branded products, as well as its namesake Waterloo Brewing lineup. Until mid-2019, the company was known as Brick Brewing Co. Ltd.

Shareholders must now vote on whether to approve the transaction, which the two companies expect to close in the first half of 2023.

It is the second time this year that a Danish brewer has agreed to purchase a Canadian beer producer. In July, Royal Unibrew – headquartered in the Danish town of Faxe – bought Toronto-based Amsterdam Brewery in a deal valued at $44-million.

Waterloo’s TSX-listed stock has lost more than half its value over the past 18 months, falling more than 57 per cent from a mid-2021 high of $7.88 per share to $3.35 per share as of Wednesday’s market close. The company’s total market value as of Wednesday’s close was roughly $120-million.

George H. Croft, who has been president and CEO of Waterloo Brewing since 2008, said in an interview that it was too early to determine what sort of role he will play at the new company.

“The new company is a Carlsberg company, it is not a Waterloo company and I understand that and am respectful of that,” he said. “I think the important message is this is a significant opportunity in the Canadian market and a significant opportunity for Carlsberg and I am excited to help in any way possible.”

For Carlsberg, buying Waterloo will provide the multibillion-dollar company with the ability to produce its products within Canada for the first time. It also represents the European brewer’s latest move to expand internationally, having paid US$130-million in June of 2020 for the Asian rights to the Brooklyn Brewery brand.

As part of its contract manufacturing business, Waterloo has already been producing Carlsberg’s Somersby Apple Cider for the Canadian market since late 2019. Anders Rud Jorgensen, managing director of Carlsberg Canada, said “the purpose will be to go into local production for our beer portfolio” but that the company is still “evaluating exactly which brands to produce” here.

Beer consumption in Canada has been steadily declining for several years. According to data from the Beer Canada trade association, the average Canadian of legal drinking age imbibed 69.3 litres in 2020, down nearly 13 per cent from the 2015 average of 79.3 litres per capita.

The total number of breweries in Canada had more than doubled, from 564 in 2015 to 1,210 by the end of 2020. The trend has led to widespread concerns among industry insiders of oversaturation as a growing number of rivals compete to supply a shrinking market.

The beer market in Canada is mature, Mr. Croft said, but it remains a category of significant size. Data from Statistics Canada show beer sales still tend to generate more than $9-billion per year countrywide.

“This allows Carlsberg and Waterloo Brewing to grow our business across Canada in a very aggressive manner,” Mr. Croft said. “It presents us with a remarkable opportunity to participate, compete and be effective in what I would call beyond beer, be it cider, ready-to-drink or non-alcoholic beverages.”

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