Silver Eagle to be acquired in $1B deal
Sale of Houston distributorship represents one of the biggest deals in the wholesale beer industry
Silver Eagle Distributors, the nation’s largest independent distributor of Anheuser-Busch beverages, has agreed to sell its Houston-area business to a Maryland private investment firm in a deal estimated to be worth around $1 billion.
Chairman and Chief Executive John L. Nau III, who acquired the Houston company in 1987 and grew it into one of the top beer distributors nationally with more than $1 billion in annual revenue, announced the sale to Redwood Capital Investments on Friday. The deal comes a little more than three months after finalizing his divorce with ex-wife Bobbie Nau, a majority owner of the distributorship.
The acquisition includes Silver Eagle’s Houston corporate offices as warehouse operations in Conroe, Cypress, Houston, Pasadena and Rosenberg. The deal does not include Silver Eagle’s San Antonio business, which John Nau will continue to own and oversee as its president and chief executive.
“Redwood Capital … is committed to maintaining and promoting the legacy of the previous business owners,” Nau said in a statement. “I think this dynamic new company will take beverage distribution in Texas to a whole new level.”
Silver Eagle and Redwood
Capital declined to comment further until regulatory approvals are secured and closing documents are signed. The two parties did not give a timeline.
The sale of Silver Eagle’s Houston business — which stretches across Harris, Fort Bend and Montgomery counties — represents one of the biggest deals in the wholesale beer industry, which has seen a wave of consolidations amid growing competition from wine and spirits, as well as seltzer and flavored water in recent years. Benj Steinman, president and editor of trade publication Beer Marketer’s Insights, estimated the deal to be worth about $1 billion.
“You don’t get a deal this big very often,” Steinman said. “It’s the largest deal ever in the Anheuser-Busch system and is in the top two for beer distributors ever.”
Silver Eagle is behind nearly 1in-7 cases of beer shipped in Texas, which is the nation’s second-largest market for beer wholesalers after California. The Houston distributor sells, markets and distributes more than 40 million cases of beer across 16 Texas counties, including more than 30 million cases in Houston alone, Steinman said. A case typically contains 24 beer bottles. It employs more than 1,500 people and distributes to more than 1,300 accounts.
In addition to Anheuser-Busch brands such as Budweiser and Karbach, Silver Eagle represents Grupo Modelo and Houston craft breweries such as St. Arnold’s and 8th Wonder. The distributor also sells other domestic, import and microbrew beers, craft spirits and several nonalcoholic beverages and waters.
Private equity firms continue to remain interested in investing in beer wholesalers. That interest comes despite changing consumer tastes that has led to slumping Budweiser and Miller Lite sales, but a renaissance of craft beers, said Lester Jones, chief economist with the National Beer Wholesalers Association, which represents more than 3,000 independent beer distributors nationally.
“Private equity looks for industries that have growth potential,” Jones said. “Redwood putting their cash in this market is a statement that they have confidence in the Texas economy.”
Redwood Capital, in a statement, said it will work closely with Silver Eagle’s management to grow the business and continue the legacy set by Nau. Redwood Capital is the investment firm for Baltimore businessman Jim Davis, who along with his cousin, Baltimore Ravens owner Steve Bisciotti, co-founded Maryland-based Allegis Group, the largest staffing company in North America.
Redwood Capital is no stranger to the beer wholesaler industry, or to Anheuser-Busch, which decline to comment on the deal. In 2017, Redwood Capital invested in Lakeshore Beverage, another Anheuser-Busch wholesaler based in Chicago.
“We intend to continue delivering our customers, suppliers and the greater Houston community with best-in-class service, while promoting an exciting environment for our employees,” Principal Ryan Mostrom said in a statement.
Houston craft brewers, whose livelihood depends on a close relationship with their distributor to get their product into bars, restaurants, grocery stores and liquor stores, are often anxious when distributors change hands, said Charles Vallhonrat, executive director of Texas Craft Brewers Guild, which represents nearly 300 craft brewers.
That’s because Texas law allows beer wholesalers to sell exclusive territory-based distribution rights without input from or payment to a brewery. Craft brewers can build up their business, only to have a distributor sell their products to another distributor who may not represent them as well.
“Anytime there is a consolidation of distributors, it has significant implication to brewers,” Vallhonrat said. “Consolidation is certainly a concern and something brewers keep their eye on very closely because distributors can hold the keys to craft brewers’ success.”
Houston craft brewers, however, said they were happy to hear of Redwood Capital’s acquisition of Silver Eagle. Brewers, who were told of the acquisition prior to Friday’s announcement, expect Redwood Capital to operate Silver Eagle much as it always has.
Bob Boblitt, Silver Eagle’s president, and John Johnson, executive vice president of sales and market, will continue their leadership roles with the company, which will continue to operate as Silver Eagle Distributors. Consumers should expect no major changes to Silver Eagle’s business, brewers said.
“Anytime there’s change, people are concerned and want to understand what it means,” said Brock Wagner, founder of St. Arnold’s Brewery, which has been represented by Silver Eagle for a decade. “In this case, I’m happy with who they’re partnering with. The buyer has a lot of resources and is really looking at this as being a silent partner.”
Said Ryan Soroka, president and co-founder of 8th Wonder Brewery in East Downtown, which has been with Silver Eagle for four years: “We’re looking forward to a fruitful relationship with the new Silver Eagle, and things to remain business as usual. Redwood is going to let one of the largest distributors in the country continue to do what they do best.”