* Beam to buy Pinnacle, Calico Jack for $605 mln
* Deal does not make Beam less attractive-analysts
* Beam shares down more than 2 pct
By Martinne Geller
April 23 Beam Inc is buying whipped
cream-flavored vodka maker Pinnacle for $605 million, the
company said on Monday, in a bid to sweeten a portfolio heavy on
Yet shares of Beam, which is often viewed as a takeover
candidate itself, fell more than 2 percent in afternoon trading.
SunTrust Robinson Humphrey analyst William Chappell said
some investors might view the acquisition as a sign that a
takeover of Beam is less likely.
"But we believe this deal would only enhance its
attractiveness to potential suitors," Chappell said, reiterating
his "buy" rating on Beam shares.
Beam is the top maker of bourbon whiskey, with brands
including Jim Beam, Maker's Mark and Knob Creek. But it only has
small vodka brands -- Pucker and Effen -- meaning it has no
sizeable competitor to Diageo's Smirnoff and Pernod Ricard's
Absolut in the largest category of spirits.
Vodka accounted for nearly a third of all spirits volume
sold in the United States last year, and grew faster than the
industry average, according to the Distilled Spirits Council of
the United States, a trade group.
Pinnacle sells unflavored vodka, but is perhaps better known
for its unusual dessert-inspired flavors. It is the
fourth-largest imported vodka brand in the United States, and
Beam said it is expected to sell more than 3 million cases this
Beam became a pure-play spirits company late last year after
being separated from Fortune Brands. Even though company
executives have repeatedly said they're focused on running the
company independently, Beam is seen as an attractive target,
especially for Diageo, which only has one small bourbon brand.
JP Morgan analyst Neal Rudowitz said he does not think
Monday's deal would change the thinking of any potential suitor,
since they might likely shed other Beam brands anyway. Beam's
other brands include Sauza tequila, Courvoisier cognac and
Rudowitz suspended his rating and price target on Beam since
JP Morgan advised the seller, White Rock Distilleries, on the
Beam said the deal, which also gives it Calico Jack rum,
would not affect 2012 earnings, but would add 5 cents to 10
cents per share in 2013. It should add more than that in 2014
and beyond, the company said.
The purchase price, to be funded by cash and debt,
represents a multiple of 20 times projected 2012 earnings before
interest, tax, depreciation and amortization (EBITDA), excluding
expected tax benefits. Net of those benefits, the multiple is
closer to 17 times EBITDA.
"While the multiple is at the higher end of the range of
historical spirits acquisitions, the brand is one of the fastest
growing vodkas in the U.S.," said JP Morgan's Rudowitz.
After anticipated cost savings of more than 20 percent of
the brands' net sales, the purchase price will reflect a
multiple of less than 10 times EBITDA, Beam said.
Beam shares were down 2.2 percent at $55.79 on the New York