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Woolies to exit Gage Roads stake

AAP logoAAP 30/08/2016 Petrina Berry

Woolworths is set to sell its majority stake in Perth-based craft brewery Gage Roads.

Gage Roads, which brews in-house beers for the retail giant, says it plans to buy back Woolworths' 23.5 per cent stake for $1.56 million.

The impending exit of Woolworths follows a deal in May that allowed Gage Roads to reduce contract brewing for Woolworths while ramping up its own craft beer volumes.

Gage Roads managing director John Hoedemaker said the proposed buy-back will allow the brewery to lessen its dependence on contract brewing of mainstream beers and help it to return to its roots as an independent craft brewer.

"The final piece in rolling out the strategy was achieving independence and the proposed transaction gives Gage Roads that flexibility and capacity," Mr Hoedemaker said in a statement on Tuesday.

Woolworths has been a major shareholder of Gage Roads since 2009. As part of the three-year deal struck in May, Gage Roads will continue to brew for Woolworths with an option to extend the deal by another two years.

Gage Roads said Woolworths has agreed to sell its 100 million shares at 1.5625 cents per share.

Woolworths has declined to comment on the matter.

Gage Roads, which has also announced a full-year net profit of $612,353, has proposed a $10.1 million capital raising to partly fund buying out Woolworths stake.

It plans to raise about $8.5 million from shareholders through a non-renounceable entitlement issue of four shares for every five at an issue price of 2.5 cents and to raise a further $1.6 million from institutional investors.

The brewery said $4.7 million of the proceeds will go to paying down debt and $3.2 million towards funding its five-year business plan.

Shares in Gage Roads had plunged by 41.18 per cent, or 2.8 cents, to four cents by Tuesday's close.

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