Suntory to buy Jim Beam maker in US$16b liquor deal

Japanese purchase of Beam to create one of the world's largest premium spirits companies

PUBLISHED : Tuesday, 14 January, 2014, 1:41am
UPDATED : Tuesday, 14 January, 2014, 1:41am

Suntory Holdings, the closely held Japanese whiskey and beer maker, has agreed to buy Beam in a US$16 billion deal to gain brands such as Maker's Mark whiskey and create the world's third-largest premium spirits company.

Investors in the maker of Jim Beam and Canadian Club liquor will get US$83.50 in cash per share, Osaka-based Suntory said yesterday in a statement. That's 25 per cent above Beam's closing price on Friday.

Suntory, the maker of Yamazaki whiskey and the Premium Malt's beer, is seeking to boost overseas growth as the population in its home country shrinks and ages. The company in 2012 had explored an offer for Beam alongside Diageo Beam, whose largest shareholder is activist investor Bill Ackman's hedge fund.

"Strategically, it makes sense for Suntory," said Trevor Stirling, an analyst at Sanford C. Bernstein in London. "I'm a little surprised they decided to go it alone, but at the moment there are low yen interest rates."

The takeover would be the largest overseas acquisition by a Japanese company since Softbank acquired Sprint Communications for US$21.6 billion last year. Fuelled by a strong currency, Japanese companies embarked on an overseas buying spree that peaked with US$113.5 billion worth of deals announced in 2012. With the yen weakening, the value of overseas deals announced last year dropped to about US$46 billion.

The takeover is the largest this year and the sixth-largest ever in the beverages industry.

Beam was formed during the break-up of Fortune Brands in 2011 - since then, the company acquired Pinnacle Vodka & Calico Jack Rum Brands in 2012 and sold Select Brands last year.

Beam CEO Matt Shattock has recently tried to lure drinkers and boost revenue with flavoured liquors, such as Pinnacle pumpkin pie vodka and maple bourbon. Net sales in the three months ended September 30 fell 4.5 per cent to US$598.7 million as results in Beam's Asia-Pacific and South American region lagged the firm's expectations.

Ackman's Pershing Square Capital Management is Beam's largest shareholder, with a 13 per cent stake. Ackman had owned a stake in Fortune Brands and pushed the company to break up, leading to the split.

While the acquisition has "very little cost synergies," it allows Suntory greater exposure to the US, the most profitable spirits market, and to expand Beam's brands in faster-growing Asian markets, Stirling said.