One of the hippest and fastest-growing craft brewers has just partnered with one of the world’s largest and best-established beer companies, thanks to a team of lawyers from Sidley’s offices across the United States. The firm recently represented the Petaluma, California-based Lagunitas Brewing Company in selling 50 percent to Amsterdam-based Heineken N.V. to form a new joint venture.
Getting to the heart of this complex deal, Dan Clivner, a senior member of the firm’s M&A and private equity practices, asked, “How do you sell 50 percent of your business but keep it independent?” He was referring to Lagunitas’ cachet as an irreverent, fiercely independent company that began on the kitchen stove of its founder, Tony Magee, in 1993.
“It was very important to our client, for their brand identity, that they remain independent but with a valuable new partner,” Clivner, co-managing partner of the firm’s Los Angeles office, explained. He admitted he was more of a scotch fan before he tasted and fell in love with Lagunitas’ signature IPA brand, described on the client’s website as “Ruthlessly delicious; a bit of Caramel Malt barley provides the richness that mellows out the twang of the hops.”
Heineken, which itself began as a craft brewer in the Netherlands, was attracted to Lagunitas for its reputation in that area of the market, which is one of the fastest-growing beverage categories. The two popular brewers plan to use the joint venture to leverage Lagunitas’ global distribution network.
Due to its 50-50 configuration, the deal, which took less than three months to close, involved a range of legal issues, including those pertaining to antitrust, governance and corporate law. “We had to work out all the arrangements of what it means to be a 50-50 owned company: governance, autonomy, reporting, transfer restrictions. All of the ‘what ifs’. It all had to be determined,” Clivner said.
“The team at Sidley was deeply involved in understanding the subtle issues involved in our unconventional joint venture with Heineken,” said Magee, adding, “There were the predictable bumps in the road but they stayed ahead of every issue, which gave me enormous confidence as we worked our way to the finish line.”
Lawyers from the firm’s Century City, New York, Palo Alto and Washington, D.C. offices helped advise on the scope of the matter. Each of them had substantive experience that they could add to the puzzle, so it was a very strong team, Clivner said.
Efforts to keep the details of the joint venture secret during negotiations between the brewers caused a minor conundrum during conferences. “We could not tip off the guest services people by telling them to serve both Heineken and Lagunitas beer with the food,” said Clivner. “That would have been ideal, but we had to protect confidentiality,” he added.