By Martinne Geller and Olivia Oran
LONDON/NEW YORK Jan 13 Suntory Holdings Ltd
on Monday said it would buy U.S. spirits company Beam
Inc for $13.6 billion cash in a deal that would make
the Japanese company the world's third-largest spirits maker.
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
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
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 Swartzberg.
The proposed acquisition is also Japan's third-largest
announced outbound deal of all time, according to Thomson
Last year, privately held Suntory floated its food and
non-alcoholic drinks company, Suntory Beverage & Food,
to raise money for overseas acquisitions. Kirin Holdings Co
bought control of Brazil's Schincariol for $2.6 billion
in 2011, and Asahi Group Holdings 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
and climbing losses on Herbalife Ltd.
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
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 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.
If the deal falls through, Beam must pay Suntory a $425
million termination fee.
The deal between Suntory and Beam came together quickly - in
less than two months, according to a person close to the
Analysts believe a counterbid by the likes of larger rivals
Diageo Plc 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
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
The combined company will have annual sales of about $4.3
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 bourbon.
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
Suntory intends to fund the acquisition with cash on hand
and fully committed financing from Bank of Tokyo-Mitsubishi
Financial advisers in the deal are Mitsubishi UFJ Morgan
Stanley for Suntory and Centerview Partners and Credit Suisse
Legal advisers are Cleary Gottlieb Steen & Hamilton LLP for
Suntory and Sidley Austin LLP for Beam.