Rapper Drake and spirits producer Brent Hocking look to raise up to $30 million through an initial public offering of their Virginia Black whiskey.
According to a Thursday, Jan. 11, statement, the $5-per-share Reg A+ offering is expected to commence following the end of the first quarter. It plans to use the proceeds to fund an expansion effort, sales and marketing, working capital and other general corporate purposes.
According to a representative of Virginia Black and bookrunner TriPoint Global Equities LLC, the company has been funded to date by the partners and founders. Virginia Black has not decided on an exchange or if it will trade, the representative said, noting the company is weighing "the best path to create shareholder value."
TriPoint Global Equities is the lead managing selling agent and bookrunner for the IPO, which will use TriPoint's Banq electronic investment banking platform. Sheppard Mullin Richter & Hampton LLP is providing Virginia Black with legal counsel, the representative said.
TriPoint recently served as lead manager and sole bookrunner on a $24 million Reg A+ IPO in October for Fatburger parent Fat Brands Inc. (FAT) and the $12 million Reg A+ IPO of lifestyle-focused Level Brands Inc. in November. The latter company, headed by chairman emeritus and model Kathy Ireland, trades on the NYSE American as LEVB.
Under Title IV of the Jumpstart Our Business Startups Act, U.S. or Canadian companies can raise up to $50 million over 12 months through Reg A+ IPOs, which have an expedited review process and are exempt from Securities and Exchange Commission and state securities law registration.
The Virginia Black representative pointed out that the Jobs Act has no quiet period, so the announcement of the IPO as soon as possible "allows potential customers who were not familiar with the brand to become aware of the product and become a customer and allows Drake's fans who were not aware he had a liquor company to become a customer too."
The exact timing of the offering depends on market conditions, the filing process and a Securities and Exchange Commission review.
According to its website and the statement, Virginia Black is a high-rye bourbon that mixes two-, three- and four-year-old bourbons. The whiskey, which sells for $35 to $40 online, is available in 45 states as well as Canada, the U.K., Ireland, Kenya and the United Arab Emirates, among other countries.
The company representative said Virginia Black sources its bourbon from MGP Ingredients Inc. (MGPI). MGP distills spirits for third parties in Lawrenceburg, Ind.
Virginia Black launched in September 2016 and has sold 60,000 cases to date, the representative said. It has production capacity for 350,000 cases, the company said.
Drake, born Aubrey Drake Graham, first broke into the spotlight with his role as Jimmy Brooks on "Degrassi: The Next Generation." He has released four studio albums, all of which have gone at least double platinum in the U.S. His second release, 2011's "Take Care," won the Grammy Award for best rap album.
Aside from Virginia Black, Drake also started lifestyle brand October's Very Own, record label OVO Sound and the Ovo Fest music festival.
Hocking, a onetime Bank of America Corp. (BAC) mortgage loan merchant, previously created DeLeón tequila in 2009. Diageo plc (DEO) acquired the brand in January 2014 in a joint venture with Sean "Diddy" Combs' Combs Wine & Spirits for undisclosed terms.
Virginia Black is distributed by Proximo Spirits Inc., a Jersey City, N.J., company that also distributes Jose Cuervo tequila, Bushmills Irish whiskey, Kraken rum, Boodles gin and Hangar 1 vodka, among other spirits.
The whiskey looks to capitalize on what has been a healthy market for so-called brown spirits -- citing data from the Distilled Spirits Council, the statement pointed to a 6.8% increase in American whiskey volume in 2016 as well as revenue of $3.1 billion, up 7.7%.
Most recently, Jose Cuervo owner Becle SAB de CV -- Proximo's parent -- in December agreed to pay $205 million for Hood River Distillers Inc.'s Pendleton Whiskey.
In July, LVMH Moët Hennessy Louis Vuitton SE acquired Washington's Woodinville Whiskey Co. for undisclosed terms.
Constellation Brands Inc. (STZ) announced in January 2017 that it had invested in Virginia whiskey maker Catoctin Creek Distilling Co. LLC. The investment followed Constellation's investment, announced in October 2016, in Kentucky's Bardstown Bourbon Co. Both minority investments had undisclosed terms.
Constellation on Oct. 5, 2016, also acquired High West Holdings LLC for $137 million net of cash.
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Rémy Cointreau SA in January 2017 closed a purchase of Seattle-based Westland Distillery for undisclosed terms. (Cointreau also announced an investment in Domaine des Hautes Glaces, a whiskey maker in the French Alps.)
Days after the Westland announcement in December 2016, Pernod Ricard SA took a majority stake in West Virginia bourbon maker Smooth Ambler Spirits Co.
The planned IPO for Virginia Black also comes roughly seven months after Diageo agreed to pay up to $1 billion for Casamigos Spirits Co., a tequila company co-founded by George Clooney. Clooney, nightlife entrepreneur Rande Gerber (the husband of model Cindy Crawford) and developer Mike Meldman founded Casamigos in 2013, and it sold 120,000 cases in 2016.
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