Beam to be sold in $16 billion deal

(Bloomberg) — Beam Inc., whose brands include Jim Beam and Maker's Mark, agreed to be bought by closely held Japanese whiskey and beer maker Suntory Holdings Ltd. in a $16 billion deal to create the world's third-largest premium spirits company.

Investors in the maker of Jim Beam and Canadian Club liquor will get $83.50 in cash per share, Osaka, Japan-based Suntory said today in a statement. That's 25 percent above Beam's closing price Jan. 10.

Beam President and CEO Matt Shattock and Beam's current management will continue to run the business. The company will remain based in north suburban Deerfield, IL, where there are about 400 Beam employees, according to a spokesman.

"Suntory has a highly decentralized model with respect to operations and management," the spokesman wrote in an email to Crain's. "They have advised us they anticipate no major changes to Beam's business platform or workforce."

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 PLC.

Beam, whose largest shareholder is activist investor Bill Ackman's hedge fund, in 2012 got 59 percent of its revenue from North America and 21 percent from Europe, the Middle East and Africa.

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'STRATEGICALLY, IT MAKES SENSE'
“Strategically, it makes sense for Suntory,” said Trevor Stirling, an analyst at Sanford C. Bernstein & Co. 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 Corp. acquired Sprint Communications Inc. for $21.6 billion last year. Fueled by a strong currency, Japanese companies embarked on an overseas buying spree that peaked with $113.5 billion worth of deals announced in 2012, data compiled by Bloomberg show. With the yen weakening, the value of overseas deals announced last year dropped to about $46 billion, the data show.

The takeover is the largest this year and the sixth-largest ever in the beverages industry, according to data compiled by Bloomberg. Beam was formed during the breakup of Fortune Brands Inc. in 2011 — since then, the company acquired Pinnacle Vodka & Calico Jack Rum Brands in 2012 and sold Select Brands last year.

Mr. Shattock has recently tried to lure drinkers and boost revenue with flavored liquors, such as Pinnacle pumpkin pie vodka and maple bourbon. Net sales in the three months ended Sept. 30 fell 4.5 percent to $598.7 million as results in Beam's Asia Pacific and South American region lagged the company's expectations.

ACKMAN CONTROLS 13 PERCENT
Ackman's New York-based Pershing Square Capital Management LP is Beam's largest shareholder, with a 13 percent stake, according to data compiled by Bloomberg. Ackman had owned a stake in Fortune Brands and pushed the company to break up, leading to the split.

Bloomberg News reported in December 2012 that Suntory had considered making an offer for Beam alongside Diageo, the world's biggest distiller.

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

“Suntory has virtually no U.S. presence,” Mark Swartzberg, an analyst at Stifel Financial Corp. in New York, said in a research note today. “This will take their share from less than 1 percent to 11 percent.”
The deal also gives Suntory a major presence in bourbons, he said.

The $16 billion transaction value includes assumption of Beam's outstanding net debt, according to the statement. The company has $2 billion in total debt, data compiled by Bloomberg show.
Suntory Beverage & Food Ltd., the soft-drinks unit of Suntory Holdings, raised about $4 billion last year in Asia's biggest initial public offering.