Foreign ownership holds appeal
Even a company that named its top beer after a hero of the American Revolution may eventually forsake its home country.
Boston Beer Co., the maker of Samuel Adams beer and Angry Orchard hard cider, would be worth more to a foreign owner unburdened by the U.S. tax structure, founder Jim Koch told a Senate committee last week. Because of that, Koch says he regularly gets pitches from investment bankers looking to strike a sale. He’s been turning them down — for now.
“We don’t mind paying our taxes here in the U.S. in gratitude for the opportunities that exist in this country and that I certainly have enjoyed — but don’t mistake that for good financial decision-making,” Koch said to the Senate Permanent Subcommittee on Investigations. “Because of our broken corporate tax system, I can honestly predict that I will likely be the last American owner of Boston Beer Company.”
America taxes its companies at the highest rate in the industrialized world. Executives like Koch say that puts corporations at a disadvantage to foreign rivals who can spend more for acquisitions and keep more of their earnings.
There’s a stigma attached to ditching America for tax purposes, but many have decided that keeping their U.S. address just isn’t worth it.
The Treasury Department took steps in September to make it harder to do these transactions, but they’re still possible and companies will keep doing them.
A dollar of pretax earnings is worth 62 cents to the Samuel Adams beermaker under American ownership, versus 72 cents under foreign ownership, Koch told lawmakers.
While the 66-year-old brewer’s main focus was taxes, Koch’s comments may be a sign that he sees a sale as the eventual fate of his $2.9 billion company.
There have been about $145 billion in brewery deals since July 2008, when Anheuser-Busch agreed to the industry’s largest takeover. The largest surviving brewers after the acquisition flurry — AnheuserBusch InBev and SABMiller — are looking for more purchases.
Boston Beer could be a smaller but appealing alternative for either of the mega-brewers, or for Heineken. There’s also MillerCoors, the U.S. joint venture between SABMiller and Molson Coors Brewing Co.
“Boston Beer is an interesting takeover target because of its brands, and also because the antitrust pushback would be very limited, as it’s only 1 percent market share,” Pablo Zuanic, an analyst at Susquehanna International Group, said in a phone interview. “There are buyers out there that would line up if he wanted to start taking bids.”