Struggling Mighty Craft eyes off Better Beer merger in last ditch effort to restructure

In an update published to the ASX today, debt-riddled Mighty Craft has revealed details of a change in strategy that will significantly increase its focus on the Better Beer brand. 

As part of this new plan, Mighty Craft is hoping to purchase all remaining Better Beer shares it currently does not hold in a last ditch effort to redirect the company towards turning a profit. As it stands, Mighty Craft only owns 33% of the zero-carb beer brand, meaning any potential deal would involve a capital raising.

"The focus and priority of the Board remains very clear - deleverage the company and continue to reduce operational costs,” said Grant Peck, Chair of Mighty Craft.

“While the Board continues to assess all available options, the Company's strategic focus has shifted towards seeking a potential merger with Better Beer.” 

According to the ASX announcement, Mighty Craft, which is currently in breach of various loan covenants with lender Pure Asset Management, would likely be forced to cease all operations if it is unable to proceed with the Better Beer merger deal. 

“The ongoing support of Pure is contingent upon its satisfaction with the Company's progress towards further divestments and debt,” said the ASX announcement.

“In the event that the Company is unable to formalise an agreement with Better Beer and Pure within the coming months, the Board consider that it would likely be difficult to secure the additional debt or equity funding that would be required to allow the Company to continue its operations.”

Mighty Craft has already started offloading assets in an effort to get its debt burden under control. Recent sales include offloading Mismatch Brewing and 78 Degrees Distillery to Peter Filopovic’s consortium of publicans for $7.2 million. Filopovic also purchased Jetty Road and Hills Cider from Mighty Craft in a series of sales that started in November.

“The deleveraging process has started with a $2.3 million debt reduction in the quarter and the divestment of 78 Degrees and Mismatch,” said Peck.

“The Company's debt levels, however, will remain unsustainable and divestments of the non-Better Beer assets alone will not be sufficient to restructure the balance sheet to the extent required.”

The Better Beer brand maintained its strong upwards trend in continuing to gain market share. In the 12 months up to March 2024, Mighty Craft sold 12 million litres of Better Beer, including 18.2% growth over the Q3 FY24, continuing already-impressive trends.

Grant Peck is hopeful that becoming equity-owner of Better Beer will help guide Might Craft out of its current dilemma. 

“Discussions with the relevant stakeholders are at a very early stage, and there is no certainty of any transaction eventuating,” he said.

The Board is committed to finding a path that balances the interests of all stakeholders, and we will update the market as required by the Listing Rules."