AUSTRALIA – Mighty Craft, one of Australia’s leading premium craft drinks companies, has entered a new agreement with its senior debt provider, Pure Asset Management Pty Ltd (PURE), to sell 7.5 percent of its shares in Better Beer in exchange for terminating all obligations related to the Royalty Deed.
This strategic move aims to alleviate Mighty Craft’s debt burden and restructure its financial obligations.
Mighty Craft confirmed the agreement with PURE in an announcement to the Australian Securities Exchange (ASX) on May 16. The transaction will terminate the Royalty Deed, releasing both parties from any further obligations under this arrangement.
The existing buyout mechanism of the Royalty Deed is based on a formula: “2.0% of the trailing 12 months Gross Product Sales multiplied by 5.5.”
Upon completion of this transaction, Mighty Craft will be left with a quarter stake in Better Beer, down from its previous 33 percent shareholding.
This decision follows recent sales of key assets, including Mismatch Brewing and the 78 Degrees Distillery, for US$7.2 million as part of a broader strategy to reduce debt.
Katie McNamara, Managing Director of Mighty Craft, emphasized the importance of the deal in reducing the company’s debt. “The royalty swap represents further meaningful debt reduction, which is a key focus of the MCL Board,” McNamara stated.
She noted that this deal, combined with a US$2.3 million debt reduction announced in the third quarter of FY24 and the anticipated funds from the sale of 78 Degrees and Mismatch, would total over US$10 million in debt reduction across the second half of FY24.
Despite the reduction in its stake in Better Beer, Mighty Craft and PURE remain committed to working towards a potential merger with Better Beer.
This merger was first suggested in the April 30, 2024 Quarterly Report. The ASX announcement highlighted that all stakeholders are actively working towards achieving this outcome, ensuring that the interests of all parties are aligned.
The sale of the 7.5 percent shares in Better Beer to PURE is scheduled to take place on or before June 12, 2024.
This transaction marks a significant step in Mighty Craft’s efforts to restructure its finances and reduce its debt, positioning the company for future stability and growth.
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