Mighty Craft placed in administration after deal stalls

Listed craft brewer Mighty Craft has called in administrators after a hoped-for merger with Better Beer failed to eventuate.

The craft beer sector has been hit hard over the past few years.

Listed brewer and spirits manufacturer Mighty Craft has been placed in administration less than five years after launching on the ASX as a vehicle to roll together beer and spirits brands and achieve economies of scale in the craft space.

The company has been selling assets in a bid to pay down debt, and was in talks to merge with fellow brewer Better Beer, however on Monday Mighty Craft said it had appointed Ankura as administrators.

“The company has been undergoing a divestment and restructuring program to reduce the

company’s debt,’’ Mighty Craft told the ASX.

“Fundamental to this program was a proposed merger between Better Beer Holdings and Mighty Craft, an arrangement that required the support of Mighty Craft’s senior lenders and the shareholders of Better Beer.

“A capital raise to support this process was also contemplated.

“It now appears unlikely that an agreement will be reached between Mighty Craft’s senior lenders, Better Beer and Mighty Craft that is acceptable to all parties.

“The directors therefore formed the opinion that the company should be placed into voluntary administration to evaluate options for the company to continue as a going concern, or if this is not possible, that an administration will result in a better return for the creditors and members of the company than would otherwise result from an immediate winding up of the company.’’

Mighty Craft shares last traded at 0.5c valuing the company at $1.8m.

This is a far cry from the amount it paid for just one of its many acquisitions, when it stumped up $47m in cash and shares for the Adelaide Hills Group, including Mismatch Brewing, Hills Cider and the Lot100 venue in the Adelaide Hills which it bought in 2021.

Mighty Craft has since divested all of these assets, as recently as last week announcing it was selling Lot100 for $1.5m to a consortium of publicans.

The company announced a strategic review in June last year, saying the business model, which included an acquisition spree in the period after listing on the ASX, required “urgent change’’.

The company cleaned out its board and management at the time, with then-chair Chris Malcolm saying, “The cost base is disproportionate to the earnings profile, debt levels are excessive and further simplification of the business model are necessary’’.

“While there are some positive growth signs, we need to address these issues urgently to ensure a near term path to sustainable earnings.”

The review led to a series of asset sales, including Mismatch and spirits company 78 Degrees being sold to former Carlton & United Breweries boss Peter Filipovic for a knockdown price of $7.2m.

In April the company also announced it was in talks to merge with Better Beer, which is performing strongly and which it has a one third stake in.

A backdoor listing and capital raise was contemplated under that deal, however that has now fallen apart.

Mighty Craft has been in breach of its loan covenants for some time.

The administrators said they would now undertake an urgent assessment of Mighty Craft’s operations.

“In the meantime, the administrators have confirmed that the operations of the company and its subsidiaries will continue on a business-as-usual basis,’’ Ankura said.

“The administrators will provide updates of any material events throughout the administration by way of announcements to the ASX.’’

The company’s shares will remain suspended while the administration is carried out.

Originally published as Mighty Craft placed in administration after deal stalls