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Tuesday, February 24, 2015

Full Sail Voting to Scrap ESOP, Merge With Investment Firm

A fascinating tidbit I thought I'd pass along.  Today, Jamie Emmerson and Irene Firmat announced that the company is considering whether to end its Employee Stock Ownership Plan (ESOP) and merge with an investment firm.  This is a little different than the standard A-B news we've been hearing lately.  John Holl explains:
The number today of employee owners—called shareholders—is 78, and on Tuesday Founder and CEO Irene Firmat and Executive Brewmaster Jamie Emmerson sent a letter to those folks, asking them to vote on a proposal to merge with a San Francisco-based investment firm....

Shareholders were given ballots earlier today and those votes will be tallied at the end of the month. If approved, the investors could take ownership by mid-March. For the existing shareholders there will be a stock-option plan, but it will no longer be an ESOP company, but Firmat said it will enable employees to benefit along with the company as it continues to grow....

Firmat noted in an interview that the investors do not have a brewing background, so they will need the existing employees with their wide range of expertise to stay on and helm Full Sail. If the vote is successful, Firmat and Emmerson plan on staying at the brewery they founded in 1987.
I am not close enough to Full Sail nor smart enough about business to be able to parse this, but maybe some smart reader can give us some insight as to the pluses and minuses for the employees.


  1. Dumbass. You're supposed to be the smart one here. Just kidding. I know that's impossible.

    I was telling someone tonight that I'd like to see the details. I'm skeptical of anything I hear coming out of ownership or management. If the ESOP being dumped, employees need to take a serious look at this arrangement. It may not be such a great deal, except for ownership and management. We need to see the fine print.

  2. It will likely not create as much ire as a buy out from one of the big boys of the brewing world, but my personal opinion is that a sale to an investment firm is just as 'bad' from some perspectives as a sale to one of the BMC behemoths.

    While people deride the BMC behemoths about being about branding and money more than beer (a ridiculous claim in my opinion but there we go), at least beer is central to the branding and money they make. An investment firm has one single objective, make as much money for their investors as is possible. They do not care about beer at all, only the Benjamins.

    If the investment company were to get a suitable offer from a BMC behemoth, then it would be the investors that would decide whether to sell or not, not the employees, Full Sail becomes just another fungible asset to trade for the maximum profit. Sure the employees would benefit from a stock option plan, but the fact remains they would have had the rug pulled out from under them.

    If the employees have sense they will reject this proposal.

  3. It matters how concentrated ownership is. If the founders own more than 50% of the voting this is ceremonial.

    An ESOP plan is one where employees are granted ownership as opposed to cash contributions to a defined contribution plan (401k). It gives employees some skin in the game but nothing very meaningful when it comes to control.

    I'd guess this is a nice PR move (we let our employees vote on it and it passed!) when in reality their vote didn't matter. This is a liquidity event for founders, just like Elysian.

    After they're sold the next step will be for the private equity firm to juice profits in the short term (3 to 5 years, typically with a lot of debt) and then take it public or sell it to another public firm (which seems to be this firm's MO) to realize a profit for investors. Don't be surprised if Full Sail is owned by another, larger consumer goods firm in 5 to 10 years.

  4. I think breweries should be owned by brewers