Beer news – Arran and Isle of Skye breweries to merge

It was announced today that two of Scotland’s island breweries – Arran and Isle of Skye – are to merge at the beginning of next year. Arran Brewery were originally founded in 2000, before entering administration and being acquired by Gerald Michaluk’s MMSI company in June 2008. The Isle of Skye brewery were established in 1995 by husband and wife team Angus and Pam MacRuary, and have been steadily growing their business since – last year their Cuillin Beast was named CAMRA Champion Beer of Scotland.

Joining the two operations together has come pretty much out of the blue, although Arran have been extremely active recently. Four months ago, Gerald Michaluk announced a plan to raise £10m for expansion through a BrewDog-style share scheme. The Fraserburgh outfit used the money gained from Equity for Punks to open a glittering new facility (at which, co-incidentally, the first trial brew was run yesterday). Similarly, Gerald is after a huge enlargement of Arran’s kit – but also a mainland-based bottling plant and a chain of pubs throughout Scotland.

So, based on today’s announcement, what does each party gain from the merger – and why might they have agreed to put pen to paper? For Arran, this clearly increases their portfolio whilst they are attempting to attract investors for the share scheme. It also gives them timely exposure on the business pages of the newspapers. Interestingly, Gerald was quoted in the Herald as saying “But it is really about getting the experience of the Skye team. Getting brewers with 18 years of experience is not easy. Angus strengthens our board and our expertise.”

Does that indicate dis-satisfaction with the brewing team at Arran? Or is Angus – who was apparently just about to retire – simply to be retained as an advisor? It will be interesting to see what effect Pam’s brewing skill has on the Arran staples. Speaking of Skye, from the merger they will also gain an upgrade in facilities, and investment that they were looking for. Arran already sell in a lot of supermarkets, so Skye could well see their beers appearing on more shelves across the country as a result.

But there are a few interesting points about this deal. Firstly, the balance of the merger. Gerald Michaluk – currently Managing Director of Arran Brewery – will become the Managing Director of the new company, to be called…Arran Brewery plc. Angus will exchange his shares in Skye for shares in Arran Brewery plc and gain a seat on the board. Is this actually a takeover? Both parties will gain from the deal – and as long as the facility on Uig is retained, there shouldn’t be any fears that Isle of Skye will go the same way as the Atlas Brewery, merged with and eventually closed by Sinclair Orkney.

From keeping up with the press releases around Arran’s expansion – which is enormous and extremely positive in scope – there’s one thing that springs to mind. Arran are really keen on cracking the American market. I think this was the reason they bought and re-launched Beers of the World magazine. Angus MacRuary apparently has experience of the US market – beers like Cuillin Beast would be well-suited to craft beer fans over there. Merging with Skye gives Arran that ‘in’ to potentially shift beers from both stables into the States.

Finally, there’s the issue of Old Worthy. A one-man operation established by Nick Ravenhall, they have recently released the first batch of beer, brewed under contract at the Isle of Skye facility. With a great story behind it, and being very active on social media – not to mention having contacts in Scandinavia – will this become another brand shifted under the Arran Brewery plc banner? Will the Skye brewery become a contract-specific plant, while the brewery on Arran handles the regular beers?

So many questions – time will tell. Let’s hope that this merger benefits all parties involved, and both Arran, Isle of Skye and Old Worthy enjoy increased sales as a result.

UPDATE 27/02/2013
It was reported today in the BBC that Arran’s expansion plans and the merger with the Isle of Skye brewery have been put on hold, after their FPMC Grant application was rejected by the Scottish Government. According to a spokesman at Holyrood, their application ‘did not meet the criteria of the scheme’. Although they have pledged to assist the Arran Brewery in subsequent development, the fact that Gerald Michaluk was quoted as saying “Without grant assistance, a brewery of this size on an island like Arran is simply not economic,” is worrying for the future of the brewery. Where this leaves the Isle of Skye brewery also remains to be seen.