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ACQUISTIONS AND DIVESTITURES

3 Months Ended

Mar. 31, 2022

2.	ACQUISITIONS AND DIVESTITURES

On February 17, 2022, the Company completed its acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”), a craft beer and hard seltzer company, for $330.4 million in cash, subject to adjustments (the “CANarchy Transaction”). The CANarchy Transaction allows the Company to enter the alcohol beverage sector and brings the Cigar City family of brands including Jai Alai IPA and Florida Man IPA, the Oskar Blues family of brands including Dale’s Pale Ale and Wild Basin Hard Seltzers, the Deep Ellum family of brands including Dallas Blonde and Deep Ellum IPA, the Perrin Brewing family of brands including Black Ale, the Squatters family of brands including Hop Rising Double IPA and Juicy IPA, the Wasatch family of brands including Apricot Hefeweizen, as well as certain other brands (collectively the “CANarchy Brands”) to the Company’s beverage portfolio. The transaction does not include CANarchy’s stand-alone restaurants. The Company’s organizational structure for its existing energy beverage business will remain unchanged. CANarchy will function independently, retaining its own organizational structure and team.

The Company accounted for the CANarchy Transaction in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations”.

The following table summarizes the preliminary fair value allocations of the CANarchy Transaction:


	Identifiable
	Assets
	Acquired and
	Liabilities		Consideration
	Assumed		Transferred
Intangibles - trademarks (non-amortizing)	$	94,500	$	—
Intangibles - customer relationships (amortizing)		54,500		—
Intangibles - permits (non-amortizing)		6,500		—
Property and equipment, net		81,285		—
Inventory		18,900		—
Right-of -use assets		12,836		—
Operating lease liabilities		(12,836)		—
Working capital (excluding inventory)		(4,844)		—
Other		(770)		—
Goodwill		80,285		—
Cash		3,248		333,604
Total	$	333,604	$	333,604

The fair value analysis has yet to progress to a stage where there is sufficient information for a definitive measurement of the respective fair values. Accordingly, the respective fair value allocations are preliminary and are based on valuations derived from estimated fair value assumptions used by management. The Company expects to complete its fair value analysis at a level of detail necessary to finalize the underlying fair value allocations as soon as practicable, but no later than twelve months from the closing of the CANarchy Transaction.

The Company determined the preliminary estimated fair values as follows:

●

Trademarks – relief-from-royalty method of the income approach

●

Customer relationships – distributor method of the income approach

●

Permits – with-and-without method of the income approach

●

Property and equipment – cost approach

●

Inventory – comparative sales method and replacement cost method

The preliminary book value of the working capital (excluding inventory) approximates fair value.

The Company has determined goodwill in accordance with ASC 805-30-30-1, “Business Combinations,” which requires the recognition of goodwill for the excess of the aggregate consideration over the net amounts of identifiable assets acquired and liabilities assumed as of the acquisition date.

For tax purposes, the CANarchy Transaction was recorded as an asset purchase. As such, the Company received a step-up in tax basis of the CANarchy assets, net, equal to the purchase price.

In accordance with Regulation S-X, pro forma unaudited condensed financial information for the CANarchy Transaction has not been provided as the impact of the transaction on the Company’s financial position, results of operations and liquidity was not material.