Any ex-Dunhill blends we going to really miss? I might go for a couple more tins of DNR before the chop. Much, much worse across the pond, all those Sutliff Match blends etc.
A Look at STG Internal Documents Regarding the Mac Baren / Sutliff Buyout
- Thread starter Skippy B. Coyote
- Start date
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I'm curious about the destruction of Sutliff factory equipment to keep it from competitors. I wonder what machinery C&D doesn't have that Sutliff owns. A high capacity industrial press for flakes? In any case I really wish Sykes Wilford and Laudisi had bought Mac Baren instead of STG. Two thoughts are 1) I bet STG worked in secret to keep deal and 2) I don't know what Laudisi's financing capacity would have been to buy it but the price quoted seems low.
I guess I'll be switching to C&D once the shot rings out.
You're very welcome! And ya know, strong blends are really nothing to be afraid of. If you're inexperienced with Vitamin N and want to try a strong tobacco then just make sure to eat a good meal first so you've got some food on your stomach, smoke it in a small bowl, and set the pipe down every 10 minutes or so and take a few minutes to evaluate how you're feeling. If you're feeling good then continue enjoying, but if you're getting a little woozy then set the pipe down and come back to it in an hour or two. It'll relight just fine and there's nothing that says you have to smoke it all in one go. Just pay attention to what your body is telling you and you'll do just fine.
Currently the following ex-Dunhill blends are all on the SP top 25 best selling list so should be fine:
My Mixture 965
Nightcap
Early Morning Pipe
Peterson Flake
Deluxe Navy Rolls
I'll have to stock up on Peterson DNR and Dark Flake.
I actually disagree. Certainly I think STG will do very well; companies don’t generally do deals they think are bad for them (although having said that studies have shown that most acquisitions are decretive of shareholder value, largely due, I suspect, to what economists like to call "the agency problem"). But the good deal here stems from the synergies of the transaction, not the intrinsic value of Mac Baren on a standalone basis. Buyers rarely pay up for synergies that they bring to the table; when it does happen it's always because of a bidding war, and as essentially the last man standing in the pipe tobacco world STG knew that wouldn't happen. In this case the price was actually slightly on the high side for a deal in Europe. Valuation of non-tech companies (tech and other high growth businesses are a very different conversation) is usually expressed as a multiple of EBITDA, a crude but frequently used proxy for cash flow. For several reasons valuation multiples of EBITDA in Europe tend to be lower than those for US transactions, and multiples for slow or no growth companies are typically significantly lower than multiples for companies that demonstrate a history of rapid organic (i.e. not acquisition driven) growth; this latter point is true whether the deal is in Europe or the United States. Obviously the deal in question was a) in Europe, and b) for a slow growth business. Both these facts have to be taken into account when evaluating the reasonableness of the price STG paid.
The multiple of the Mac Baren deal was 6.3X, which is to say STG paid 535 million DKK for a business with EBITDA of 85 million DKK. This multiple is perhaps 25% above the European average for a small middle market company with little prospects in the way of organic growth; it is likewise perhaps 20% lower than a buyer might have paid in the US. So in brief the pricing here would be slightly below the average deal in the States, and a bit better than the average one in Europe; all adjusted for size, industry, etc.
All this is somewhat generic, without knowing any of the details that can also materially affect valuation. Some of the things that can drag a price down, for instance, are liabilities that are assumed by the buyer; in this case those would include but not be limited to termination costs for employees (higher in Denmark I suspect than Virginia), and closure costs for the various facilities (lease obligations, remediation if any, etc). Other possible negative adjustments are for outstanding debt, deficient working capital, etc.
I'm not saying that STG won't make money off the deal. As I said at the start I absolutely think it's a good deal for them. The price paid, however, was not a song. With a dearth of other strategic players lining up to bid that only left private equity funds, and a) this deal is pretty small for most funds to be interested, b) growth, the holy grail of all buyouts, is largely absent, and c) when the time for an exit comes (the typical time horizon of PE funds is 3-5 years) who do they sell too? Another fund? STG?
All of this is to say that the price paid seems reasonable to me; it could have been a bit higher, or a bit lower, but it's in the ballpark of what a willing buyer would pay a willing seller, especially in a market where all the other strategics are long gone.
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If you’re bitching about the business decision that was made, and buying the shit out of what’s left, I think there’s something wrong.
Tobacco is a growing industry worth $900 billion. I was astounded that the entire portfolio went for only $77,000,000. I haven't looked at books or numbers, so you may very well be correct. After all, it sold for a number, so that's at least one good measure of the company's value.
However, according to reports, the Board had nothing to do with the sale and did not have to approve it, so STG didn't go through a corporate M&A analysis in buying MacB and Sutliff. That's a risk, and STG had to have priced that in.
The family who sold it didn't want it. I think they sold it firesale to get in under a new Danish M&A law, which would have required these types of agreements to go through their Congress.
It looks like the primary motivating factor in STG's purchase was to buy themselves a monopoly. They clearly didn't care about the brands they bought. They bought them to destroy them.
According to the report, the STG portfolio today is 111 brands with 3002 SKUs. By the end of next quarter (1Q2025), they plan to reduce to 95 brands, with 1253 SKUs. These numbers and timelines are specific enough that they know exactly what they are going to cut, which includes all of Sutliff.
By 2028, STG wants to get down to 53 brands. Then, according to the video, they want 80% of their SKUs to generate 99% of their pipe tobacco contribution margin. This seems like a ridiculous goal, to have 20% of your SKUs generating nothing. Are they saying this because they need internal/inventory SKUs? Or are they claiming that they, out of the goodness of their corporate heart, are going to keep around 20% of their SKUs just for the connoisseur market? Who knows. That tells me they really only want to focus on 42 of their 111 brands.
I'm going to light some Westminster. Thanks, Greg.
It's just business. Not the first time it's happened nor will it be the last. As always buy as much tobacco as you can when you can.
This new video from Bradly was a great excuse for ordering 15 more pounds for my cellar. I have Ball jars ready for the arrival, but they sure don’t stack as well as I would like.
This leads to my question for the group— Have any of you tried storing the 1 pound Sutliff ( or any other brand) plastic bags in .50 Caliber ammo cans? They have a built in gasket, they stack better than jars, and they are unlikely to break if they fall over.
Thank you for sharing any knowledge you may have.
This leads to my question for the group— Have any of you tried storing the 1 pound Sutliff ( or any other brand) plastic bags in .50 Caliber ammo cans? They have a built in gasket, they stack better than jars, and they are unlikely to break if they fall over.
Thank you for sharing any knowledge you may have.
Lots of people keep saying the tobacco industry is growing, but every time I try to look, everything says it's shrinking. Where exactly is it growing?
China and India.
Are these ammo cans 100% air tight when sealed?
I use food grade gusseted 7mil Mylar bags which I keep in sealed bins. Those will keep the contents safe for many years.
Yeah, but worldwide consumption as a whole is still down and decreasing from what I can tell. Is China and India growing faster than the rest of the world is shrinking?
Tobacco use declines despite tobacco industry efforts to jeopardize progress
Trends in 2022 show a continued decline in tobacco use rates globally. With about 1 in 5 adults worldwide consuming tobacco compared to 1 in 3 in 2000. WHO urges countries to continue putting in place tobacco control policies and continue to fight against tobacco industry interference.
I have to give Bradley props for this episode. I’ve been watching his stuff (and sometimes things) for about a year on youtube. His content is always interesting.
I did get the email below yesterday from TobaccoPipes.com and bought a complete set of Pipe Force for cellaring since it looks pretty clear now that when it’s gone, it’s gone.
I did get the email below yesterday from TobaccoPipes.com and bought a complete set of Pipe Force for cellaring since it looks pretty clear now that when it’s gone, it’s gone.
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They are and have been the top tobacco consumers in the world for some time now.Yeah, but worldwide consumption as a whole is still down and decreasing from what I can tell. Is China and India growing faster than the rest of the world is shrinking?
Tobacco use declines despite tobacco industry efforts to jeopardize progress
Trends in 2022 show a continued decline in tobacco use rates globally. With about 1 in 5 adults worldwide consuming tobacco compared to 1 in 3 in 2000. WHO urges countries to continue putting in place tobacco control policies and continue to fight against tobacco industry interference.www.who.int
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Thank you for the idea. I now have Mylar bags on order!