Including the assumption of Beam's net debt, the deal is valued at
$16 billion. It brings together Beam's Jim Beam and Maker's Mark
bourbons, Courvoisier cognac and Sauza tequila with Suntory's
Yamazaki, Hakushu, Hibiki and Kakubin Japanese whiskies, Bowmore
Scotch whisky and Midori liqueur.
Once the acquisition is completed, Suntory will become the third
largest whiskey company and the fifth largest malt whiskey company
by volume, according to International Wine & Spirit Research.
The deal is the latest example of how Japanese beverage companies
are seeking to quench their thirst for overseas growth as the
population in their home market shrinks.
"All Japanese beverage companies have been focused on getting growth
outside Japan," said Bernstein Research analyst Trevor Stirling.
The deal boosts Suntory's market share in the U.S. to 11 percent
from less than 1 percent, according to Stifel Nicolaus analyst Mark
The proposed acquisition is also Japan's third-largest announced
outbound deal of all time, according to Thomson Reuters data.
Last year, privately held Suntory floated its food and non-alcoholic
drinks company, Suntory Beverage & Food <2587.T>, to raise money for
overseas acquisitions. Kirin Holdings Co <2503.T> bought control of
Brazil's Schincariol for $2.6 billion in 2011, and Asahi Group
Holdings <2502.T> took a stake in Chinese brewery Tsingtao in 2009.
ACKMAN WINS BIG
One of the biggest winners in the Suntory deal will be Pershing
Square Capital Management. The $12 billion hedge fund owned by
William Ackman owned 12.8 percent, or 20.8 million shares, of Beam
at the end of the third quarter.
At that time, Beam was Pershing's third-biggest position, and it has
helped boost the hedge fund's performance in a year overshadowed by
a $500 million loss on J.C. Penney Co Inc <JCP.N> and climbing
losses on Herbalife Ltd <HLF.N>.
Pershing Square first invested in Fortune Brands in October 2010.
The company then sold its golf business, which included Titleist
golf balls, and spun off its home supply products including faucet
maker Moen and MasterBrand Cabinet. The name of the remaining
company was then changed to Beam.
Ackman declined to comment on the deal with Suntory.
Suntory said on Monday that it would pay $83.50 per share in cash, a
25 percent premium to Beam's closing stock price of $66.97 on
Friday. Beam shares closed up 24.6 percent at $83.42 on Monday.
The purchase price is more than 20 times Beam's earnings before
interest, tax, depreciation and amortization, a multiple that comes
close to the record 20.8 times EBITDA that Pernod Ricard <PERP.PA>
paid in 2008 for the maker of Absolut vodka.
But unlike the Absolut acquisition, there are few cost-saving
opportunities in Monday's deal, Stirling said, since more than 90
percent of Suntory's business is in Japan, and the Beam business
will continue to operate in the United States.
[to top of second column]
If the deal falls through, Beam must pay Suntory a $425 million
The deal between Suntory and Beam came together quickly — in less
than two months, according to a person close to the transaction.
Analysts believe a counterbid by the likes of larger rivals Diageo
Plc <DGE.L> or Pernod is unlikely, citing the deal's high multiple,
termination fee and approval by both boards.
Suntory already distributes Beam products in Japan, and Beam
distributes Suntory's products in Singapore and other Asian markets.
Suntory already has a portfolio of Japanese whiskies and one Scotch
that are strong in its home market, but the acquisition of Beam
gives it bourbon, Scotch, Irish and Canadian whiskies and access to
a stronger distribution network not just in the U.S. but in key
emerging markets such as India, Russia and Brazil.
The combined company will have annual sales of about $4.3 billion.
Beam has been viewed as an attractive takeover target since becoming
a stand-alone public spirits company in October 2011. Analysts and
bankers long speculated that its range of bourbons would fit nicely
into Diageo's portfolio, which has many Scotch whiskies but only one
So-called brown spirits, like whiskey, have experienced a resurgence
in recent years, helped by the growing popularity of classic
cocktails. U.S. sales volume of bourbon and Tennessee whiskey have
grown 13.2 percent in the five years to 2012, according to the
Distilled Spirits Council of the United States. Super-premium brands
have grown nearly 80 percent over the same period.
Suntory intends to fund the acquisition with cash on hand and fully
committed financing from Bank of Tokyo-Mitsubishi UFJ.
Financial advisers in the deal are Mitsubishi UFJ Morgan Stanley for
Suntory and Centerview Partners and Credit Suisse <CSGN.VX> for
Legal advisers are Cleary Gottlieb Steen & Hamilton LLP for Suntory
and Sidley Austin LLP for Beam.
(Reporting by Martinne Geller in London
and Olivia Oran in New York; additional reporting by Svea Herbst in
Boston; editing by Greg Mahlich, David Evans, Lisa Von Ahn and
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