Aussie lessons for Moa's IPO

What hope for an extinct bird in a saturated industry?

We'll soon know.

Moa Brewing Company announced this week it is planning a $15 million NZX float by the end of the month.

It has a pedigree, having been founded in 2003 by Josh Scott of the well-known Allan Scott wine family.

Since 2010 it has been backed by entrepreneur Geoff Ross's Business Bakery, co-owned with Grant Baker and Stephen Sinclair, along with local investor Pioneer Capital run by Randal Barrett.

Mr Ross is the entrepreneur who sold Vodka brand 42 Below to Bicardi for $138 million in 2006, now behind NZX-listed scented candle-maker and skin care company Ecoya.

Neither of the country's largest breweries are listed any more.

Lion Nathan delisted in 2009 after Japanese brewer Kirin's successful takeover, and DB Breweries went private in 2004 after majority shareholder Asia Pacific Breweries – controlled by Heineken and Fraser & Neave of Singapore – bought the 23% it didn't own.

While Moa is one of the country's largest beer exporters to the United States, New Zealand is not short of craft breweries.

The Brewers Guild of New Zealand lists almost 50 breweries, including brew pubs and the Big Two.

Supermarket fridges and cool rooms are heaving with boutique brews such as Wellington-based Tuatara, Emerson's out of Dunedin and Canterbury's Wigram Brewing Company.

In Australia – where they necked 83.4 litres per person in 2010, according to one count, compared to our 70.5 litres – there is a drought of stocks to entice beer investors now former ASX-listed Little World Beverages, brewer of the popular drop Little Creatures, has been swallowed by Lion Nathan.

Lion, which already owned a 36.3% stake, offered $A5.30 a share, a 40% premium on the share price, valuing the company at about $A380 million.

Ironically, one of the few available beer stocks in Australia is Coca-Cola, which has a Fijian beer arm and has firmed on beer plans for New Zealand.

WA's trio of beer company IPOs

Despite Little World's success, there are still risks with brewery IPOs, as shown by a trio of Western Australian beer floats over Christmas in 2006.

Oz Brewing raised $A1.5 million to establish a restaurant and microbrewery in Fremantle, under the Mad Monk label.

It listed at the same time as Gage Roads Brewing and Empire Beer Group.

In November 2008, Oz Brewing was placed into administration, after trying to buy a controlling share in a steel housing and shed business.

After raising nearly $A3 million to pay outstanding creditors, it was reinstated to the ASX and revived its Mad Monk brand in a joint venture with Ironbark Brewery.

Bizarrely, it then attempted to branch out into mining, but the deal with Volcan Australia Corporation soured and led to Supreme Court proceedings.

Oz Brewing shares (ASX: OZB) were trading at A0.4 cents on Thursday afternoon, after hitting the boards in 2006 at A21 cents.

By comparison, Gage Roads Brewing shares (ASX: GRB) were trading for A6.5 cents, well below its A40 cent issue price.

As for Empire Beer Group, in 2008 and 2009 the shares languished at about A5 cents.

Early last year it was transformed into a car park technology company, after the 100% acquisition of New Zealand company Meter Eye.

Shares in Car Parking Technologies (ASX: CPZ), as it is now known, were trading at A25.5 cents this week – a boost from it beer days but shy of its 2007 issue price was A35 cents.

Was it a case of too much beer? In 2006 there were an estimated 80 microbreweries across Australia, with a quarter in Western Australia.

The Geoff Ross 'magic'

We are left with a mixed picture. 

There's room for brewery investments in New Zealand, given the Big Two are no longer listed.

Across the Tasman there's a rubbish pile of penny dreadful beer company stocks – excepting Coca-Cola's part-time interest – with the gem of Little World giving Moa hope.

What to make of it all? And what are Moa's prospects?

"The alcohol business is a distribution and brand game," Tower Investments ceo Sam Stubbs says.

"It appears to us that you either have huge scale or you operate at the very boutique end, and it's a difficult one to be a middle player.

"If you look at 42 Below, what happens is you end up getting bought by a massive company with huge distribution."

It appears the Geoff Ross magic is already at work, even on Tower.

Mr Stubbs will sit down with Moa's management next week despite his firm's policy of not investing in companies which don't make a profit.

"We here at Tower are enthusiastic drinkers of Moa beer. It doesn't necessarily mean we'll buy the stock, but it's well-branded and it's a good product.

"But it is, at the moment, a very, very small company."

Mr Ross's association with Moa will be a plus for management, Mr Stubbs says, because of his form with start-ups.

"Does it change our mind? No, it doesn't. You'd have to say it improves the chances of it being a success but this is high-octane territory."

Mr Stubbs says alcohol is a fairly recession-proof industry and the IPO comes during a shortage of listings and a buoyant sharemarket.

"You could be looking back in five years' time and this thing could be worth nothing or it could be worth a tremendous amount of money.

"It's very, very difficult to know which side that will fall on."