Summary
- Brambles Limited has signed a deal with MicroStar to merge its Kegstar keg rental business with the latter.
- As per the deal, MicroStar would buy Kegstar at an enterprise value of US$52.2 million.
- On merger, Brambles would own 15% interest in the merged entity and MicroStar would own the rest.
- Once the entities are merged, it would create an international leader in the beer keg rental market.
On 10 February 2021, Brambles Limited (ASX:BXB) announced that it signed a contract to merge its Kegstar keg rental business with a top US beer keg solutions provider, MicroStar. 15% of the combined entity would be owned by Brambles and the remaining by MicroStar’s existing shareholders.
As part of the agreement, MicroStar would buy Kegstar at an enterprise value of US$52.2 million. Further, MicroStar would issue scrip in MicroStar to BXB in the form of consideration. The agreement between the entities depends on foreign investment consent in ANZ. In case of approval, MicroStar is expected to complete the process during 1H 2021. According to the deal, Brambles would turn out to be a party to the current MicroStar stockholders agreement, which includes key facets of combined businesses, comprising governance and exit provisions.
A Quick Glance at the Two Parties
Kegstar: Kegstar is a member of the global beer keg rental sector and its businesses span across the UK, Ireland, the Netherlands, and the US.
MicroStar: MicroStar is a market leader in the US, the largest beer keg market globally, that focuses on ‘pay-per-fill’ business model just like Kegstar.
Impact of the Merger
Once the entities are merged, it would create an international leader in the beer keg rental market. The business could provide service to both craft customers & global brewers. It would also create significant growth opportunities.
Key Accounting Impacts
- The Company would disclose any impact related to the transaction as a consequential event in the 31 December 2020 financial statements. The results of the Kegstar business would be within continuing operations.
- The results of Kegstar in the present & previous year would be re-categorised to discontinued operations.
- BXB would deconsolidate the net assets of Kegstar once the deal gets completed. It would recognise an equity investment in MicroStar at its fair value.
- BXB’s 15% share in MicroStar would be reported for within Investments on the future balance sheet. It would recognise its share of gain or loss after tax made by MicroStar on a single line item in P&L statement recorded under continuing operations.
Stock Information: At AEDT 2:44 PM, BXB shares were trading at A$10.675, up 0.140% from its last close. The Company has a market capitalisation of A$15.66 billion.
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