Brewery seeks merger, would increase output

Big savings expected from greater use of Frederick plant

January 10, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

In an attempt to consolidate and save millions of dollars, Frederick Brewing Co. announced yesterday a proposed merger with Snyder International Brewing Group, a Cleveland-based brewery that owns 51 percent of Frederick's voting stock.

Under the proposal, the Maryland company would be the surviving corporation and the main brewery, expected to produce 60,000 barrels, or 1.9 million gallons, of beer per year.

Privately held SIBG or its members would receive shares of Frederick's common stock, amounting to approximately a 95 percent stake in the company after the merger. Frederick said its board of directors set up a committee to evaluate legal and financial issues in the proposal due partly to the fact that SIBG and Frederick are controlled by C. David Snyder, who is chairman and chief executive of both companies.

"Frederick was a very troubled business," said Snyder, who bought 4.4 million shares of the Frederick-based brewery for $2 million in cash in 1999. He also bought the brewery's land and plant for $2.9 million in cash, warrants and assumed debt. "It's a world-class brewery for its size and the capacity is very large, but it's been completely underutilized.

"Part of the reason for the merger is to take advantage of the capacity," said Snyder, who was at the Frederick County plant yesterday. "And frankly, I've been funding this thing, all the losses, for the last couple years. It just makes more sense financially to collapse the two into one company."

Merging the two companies could save several million dollars, Snyder said.

Snyder bought the Frederick facility for its state-of-the-art brewing plant, which cost $9.8 million and opened in 1997. Though the brewery can produce 80,000 to 100,000 barrels a year, it currently operates at 35 percent of capacity.

In preparation for a merger, Snyder said he began assembling a leadership team that included Al Spinelli, a veteran of Rolling Rock's Latrobe Brewing Co., to take over as Frederick's executive vice president and general manager.

Snyder closed a Cleveland brewing plant two months ago and moved production of the Crooked River brand to the Frederick facility.

Snyder had been paying Boston Beer Inc., the brewer of Samuel Adams beer, about $1 million a year for bottling Little Kings, the signature beer of Hudepohl-Schoenling Brewing Co., a small Cincinnati brewery he also owns.

But part of the production of Little Kings has been transferred to the Frederick plant. About 15 percent of Little Kings brand will be done at another plant yet to be revealed because Snyder is in negotiations to purchase another brewery.

Frederick is a specialty brewer that produces 16 styles of beer under the brand names of Blue Ridge, Wild Goose and Brimstone.

"We want the Frederick plant running more closely to capacity," Snyder said. "The merger will create buzz around this organization that it's nerver had. It makes a lot of sense and it changes the whole mood of the place."

Shares of Frederick Brewing doubled yesterday to close at 18 cents per share.

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