Brandevor announces subsidiary reorganization.

REDMOND, Wash.--(BUSINESS WIRE)--May 17, 1996--Brandevor Enterprises Ltd. (BVE.T) today announced that it will seek shareholder approval to permit MicroStar Breweries Inc., its Washington State based U.S. operating subsidiary, to conduct a U.S. public offering with the object of obtaining a listing as a U.S. public company trading through the facilities of the USA NASDAQ system.

MicroStar intends to raise approximately $5.5 million U.S. by the sale of 1.0 million shares of its stock through an initial public offering at a price of approximately $5.50 U.S. MicroStar executives anticipate that this offering will be completed in the fourth quarter 1996.

"Brandevor management recognizes that in order to take advantage of the continuing growth of the craft beer market in the USA significant capital is required," stated Robert Wilson, chief financial officer.

"Since most of the company's operations are in the USA, the company believes that it is logical to pursue opportunities that exist to raise needed capital through facilities provided in the U.S. investment community. We are enthusiastic about our position in this regard."

Brandevor currently holds 1,085,000 shares of MicroStar stock and the proposal to shareholders requests that they accept a plan that includes the sale of up to 125,000 of these shares of MicroStar stock held by Brandevor at the time of the MicroStar public offering (to raise approximately $650,000 U.S.), the distribution of another 530,000 shares to Brandevor shareholders over an 18 month period and the optioning of 100,000 shares to MicroStar management at an average 45 percent premium to the MicroStar Initial Public Offering price.

Assuming approval by the shareholders, Brandevor will become a minority shareholder in MicroStar as a result of these distributions and the public offering of MicroStar stock.

Further to the agreement, all inter-company debt would be forgiven with Brandevor maintaining responsibility for outstanding convertible debentures (and related collateral) and MicroStar assuming all debt directly associated with the brewery purchase as well as operations and trade debt.

Preparatory to the planned IPO, Brandevor further announces that, subject to regulatory approval, it has approved a plan to allow MicroStar to increase its current private placement (see news release dated Feb. 26, 1996) from $650,000 U.S. to up to $812,500 U.S. which is an additional 50,000 units at a price of $3.25 U.S.

Terms of the increase are identical to the terms proposed in the initial $650,000 offering which is now substantially complete. If all shares are sold, the private placement investors will own, undiluted, 18.7 percent of MicroStar as compared to 15.6 percent under the terms of the original offering.

Brandevor also announces that its 1995 annual audit is now completed and was mailed to registered shareholders today. As an aspect of the agreement with MicroStar, the company will accept significant write-downs of specific, mostly intangible assets including label development expense, Simpatico trademark valuation and bad debt.

As a results, while gross revenues climbed to $3.442 million (U.S.) in 1995, an increase of 28 percent over 1994, general & administrative expenses rose to $1.181 (an increase of 40 percent) and an additional one time write-down of $972,000 U.S. resulted in a net loss for the year of $1,589,085.

"While the numbers are certainly significant, the parties agreed that it is in the best interests of all concerned that we make these adjustments at this time so that both Brandevor and MicroStar can move forward with clean balance sheets," stated Wilson. -0-

The Toronto Stock Exchange has neither approved nor disapproved the contents of this release.

CONTACT: Brandevor Enterprises Ltd.

Glen Varty, 416/863-9146, fax: [phone]