Mighty Craft’s thirst for a suitor

Struggling alcohol producer Mighty Craft is in talks to merge with Better Beer and raise capital off the back of that deal but warns that if the move doesn’t succeed, the outlook for the company is uncertain.

Mighty Craft has been struggling with a large debt load and has been offloading assets over the past year or so in a bid to repair its balance sheet.

The company listed in 2019 and made a series of acquisitions for a combination of cash and equity that it has been unwinding rapidly, the most recent being the sale of South Australian-based Mismatch Brewing Company and spirits company 78 Degrees to former Carlton & United Breweries boss Peter Filipovic for a knockdown price of $7.2m.

Those assets were part of a wider, $47m cash and equity buyout orchestrated by Mighty Craft in 2021.

Mighty Craft in its entirety is now worth less than $5m.

The company’s one-third stake in Better Beer has been performing strongly, however, with Mighty Craft saying on Tuesday that Better Beer was gaining market share and had exhibited growth of 18.2 per cent in the third quarter.

Across the group, revenue fell 22 per cent compared with the previous corresponding period to $19.8m, and net operating cashflows were $2.4m.

Mighty Craft said it paid down $2.3m in senior debt during the quarter, and about half of the proceeds of the Mismatch and 78 Degrees sale would also go toward debt repayments.

However, “the company remains in breach of various loan covenants and the ongoing support of Pure Asset Management is contingent upon its satisfaction with the company’s progress towards further divestments and debt reduction,” Mighty Craft said.

The company is now in talks with the majority owners of Better Beer about acquiring all of that company, “in exchange for the issue of shares in the company to the Better Beer shareholders, and a subsequent capital raise”.

However, Mighty Craft warned that sealing this deal was likely crucial to its survival.