ROCHESTER, N.Y., Dec. 18 /PRNewswire/ -- Genesee Corporation
(Nasdaq: GENBB) today announced that its Genesee Brewing Company subsidiary
has completed the sale of its brands and all other brewing assets to High
Falls Brewing Company, LLC. High Falls Brewing Company was formed by Samuel
T. Hubbard, Jr., the Corporation's President and Chief Executive Officer, and
other members of the Corporation's management, to acquire the Corporation's
brewing business.
The purchase price was $25.8 million. Genesee Brewing Company received
$14.8 million in cash at the closing. The balance of the purchase price was
paid by High Falls giving promissory notes totaling $11 million. $6.5 million
of this amount is seller bridge financing represented by three and a half year
notes which are expected to be paid off within nine months of closing from the
proceeds of a $6.5 million HUD-sponsored economic development loan and grant
package which High Falls has applied for. The remaining $4.5 million of
seller financing is represented by a three year note bearing interest at
12% per year.
The $6.5 million bridge loan bears interest at prime plus one and is
secured by a $3 million first mortgage on the brewery facility and a security
interest in the brewery machinery and equipment that is subordinate only to
High Falls' senior bank debt. The remaining $4.5 million of seller financing
is secured by a security interest in all tangible and intangible property of
High Falls that is subordinate to the senior bank and mezzanine debt
financing.
The Corporation currently estimates that the sale will result in a net
gain of approximately $5 million. The gain will be deferred until the
$6.5 million bridge loan is paid off from the proceeds of the HUD financing.
In order to obtain the consent of Boston Beer Company to assign the
production agreement between Genesee Brewing Company and Boston Beer Company
to High Falls, Genesee Brewing Company was required to guarantee High Falls'
performance of the production agreement and maintain a minimum liquid net
worth for three years after the closing, starting at $7.25 million in the
first year and declining to $5.15 million in the third year.
The deferred payment of purchase price under the $6.5 million bridge
financing and $4.5 million three year note, together with the minimum net
worth requirement for Genesee Brewing Company under the Boston Beer guarantee,
will delay distribution of a large portion of the proceeds from the brewery
sale to the Corporation's shareholders.
The sale of Genesee Brewing Company brings an end to almost seventy years
of regional brewing by the Corporation and the Wehle Family, which founded
Genesee Brewing Company in 1932. Charles S. ("Chipp") Wehle, Chairman of the
Corporation and grandson of Brewery founder, Louis A. Wehle, said, "The sale
of the Brewery triggers a variety of emotions. We are relieved that the sale
has been completed, ending more than two years of uncertainty about the
Brewery's future. We are pleased that the Brewery will continue as a locally
owned business with strong ties to the Rochester community, and that our loyal
employees can continue to work in a business they truly love. We also feel a
sense of sadness and regret that the Wehle Family is ending its long
association with a great Rochester institution and the Genesee Family of
employees, distributors and consumers who made the beer business such a fun
place to work," said Mr. Wehle.
Under the terms of the sale agreement, Mr. Hubbard and the other executive
officers of the Corporation who invested in High Falls Brewing Company
resigned as officers of the Corporation to join High Falls. Mr. Hubbard will
continue to serve as a director of the Corporation. The other officers who
resigned are John B. Henderson, Senior Vice President and Chief Financial
Officer, William A. Neilson, Vice President-Human Resources and Michael C.
Atseff, Vice President and Controller. The Corporation has entered into a
short term agreement with High Falls to obtain certain services from some of
the former officers, including Messrs. Hubbard, Henderson and Neilson.
The Corporation announced that Stephen B. Ashley, who has served as a
director of the Corporation since 1987, has been elected President of the
Corporation. Mark W. Leunig, Vice President, Secretary and General Counsel of
the Corporation, has been promoted to Senior Vice President and Chief
Administrative Officer. Steven M. Morse, Corporate Consolidations Manager,
was promoted to the office of Vice President and Treasurer.
Messrs. Ashley, Leunig and Morse will manage the Corporation's affairs
during the liquidation and wind-up phase under the plan of dissolution and
liquidation that was approved by shareholders in October. The Corporation
expects to complete the sale on terms previously announced of a substantial
portion of its equipment leasing portfolio in December, with the remainder of
the lease portfolio sale expected to close in January. The letter of intent
with Ralcorp Holdings, Inc. to sell the Corporation's foods business has
expired. The Corporation is continuing its discussions with Ralcorp.
The Corporation expects to make the first of a series of liquidating
distributions to shareholders in the first quarter of calendar 2001. The
amount and timing of liquidating distributions will depend on a number of
factors, including the amount that will ultimately be realized from the sale
of the Corporation's assets and the timing of the receipt of the proceeds of
such sales, which will depend on the terms of the transactions in which the
assets are sold, including provisions for indemnification and other
post-closing obligations under the agreements pursuant to which the assets are
sold. Other factors that will affect the amount and timing of liquidating
distributions include payment or provision for the payment of debts, expenses,
taxes and other liabilities of the Corporation, as well as the timing and cost
of liquidating and winding up of the Corporation's business and affairs.
"We will work to liquidate assets in an orderly manner so as to maximize
their value to shareholders in the shortest possible time," said Mr. Leunig.
"Based on the terms of the seller financing of the brewery sale and the
indemnification and other post-closing obligations that are customary in asset
divestiture transactions, we currently expect that dissolution and wind-up of
the Corporation will take at least three years to complete," said Mr. Leunig.
NOTE: Statements made in this news release which are not historical,
including statements regarding the sale of the Corporation's brewing, foods
and equipment leasing businesses, the liquidation and dissolution of the
Corporation and the payment of liquidating distributions, are forward-looking
statements. Such forward-looking statements are subject to a number of risks
and uncertainties, and there can be no assurance that the expectations or
results reflected in those statements will be realized or achieved. Risks and
uncertainties relating to the sale of the Corporation's brewing business
include, without limitation, non-payment or other default by High Falls
Brewing Company on the seller financing of the brewery sale, failure of High
Falls to obtain the HUD financing it has applied for, a claim by Boston Beer
Company under the production agreement performance guarantee and the minimum
net worth requirement thereunder, and post-closing indemnification
obligations. Risks and uncertainties relating to the proposed sale of the
Corporation's equipment leasing business include, without limitation, the
failure of the transaction to close for whatever reasons, further negotiation
of terms and conditions, purchase price adjustments, post-closing
indemnification obligations, the failure to satisfy other conditions necessary
to consummate the transaction such as failure to obtain necessary regulatory
approvals and third party consents, and the possibility that a delay in
resolving such conditions could jeopardize the transaction. Risks and
uncertainties relating to the disposition of the Corporation's food business
include, without limitation, failure to reach agreement with Ralcorp on the
sale of the business, failure to find another suitable buyer if a sale to
Ralcorp is not completed, and risks associated with continuing to operate the
business while seeking other buyers. Risks and uncertainties relating to the
dissolution and liquidation of the Corporation include, without limitation,
the actual amount of proceeds from the sale of the Corporation's assets, the
ultimate settlement amounts of the Corporation's liabilities and obligations,
actual costs incurred in connection with carrying out the plan of dissolution
and liquidation, including administrative costs during the liquidation period,
the amount of income earned on the Corporation's cash and cash equivalents and
short-term investments during the liquidation period, and the actual timing of
distributions.
Copies of Genesee Corporation press releases are available free of charge
by calling PRNewswire's Company News On Call at 800-758-5804, Extension
352775, or on the Internet at http://www.prnewswire.com/cnoc.
SOURCE Genesee Corporation
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Company News On-Call:
http://www.prnewswire.com/comp/352775.html or fax,
800-758-5804, ext. 352775
CONTACT:
Mark W. Leunig, Director of Investor
Relations, Genesee Corporation, 716-263-9440
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