Japan's Suntory acquires US spirits maker Beam in $16-bn deal

Suntory Holdings Ltd has acquired Beam Inc of the United States for $13.6 billion in cash, in a deal that would make the Japanese company the world's third-largest spirits maker.

Suntory Holdings Limited and Beam Inc today jointly announced that they have entered into a definitive agreement under which Suntory will acquire all outstanding shares of Beam for $83.50 per share in cash or total consideration of approximately $16 billion, including the assumption of Beam's outstanding net debt.

Suntory intends to fund the acquisition with cash on hand and fully committed financing from Bank of Tokyo-Mitsubishi UFJ.

The deal 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.

The acquisition price represents a 25-per cent premium to Beam's closing price of $66.97 on 10 January 2014, and a 24-per cent premium to the volume-weighted average share price over the last three months and a multiple of more than 20 times Beam's EBITDA for the 12-month period ended 30 September 2013.

The transaction, which has been unanimously approved by each company's board of directors, is expected to close in the second quarter of 2014, subject to Beam stockholders' approval, regulatory approvals and other customary closing conditions.

The transaction will create a stronger global player in premium spirits with annual net sales of spirits products exceeding $4.3 billion.

Its combined portfolio of leading brands will include Beam's Jim Beam, Maker's Mark and Knob Creek bourbons, Teacher's and Laphroaig Scotch whiskies, Canadian Club whisky, Courvoisier cognac, Sauza tequila, and Pinnacle vodka, and Suntory's leading Japanese whiskies Yamazaki, Hakushu, Hibiki, and Kakubin, Bowmore Scotch whisky and Midori liqueur.

Beam's president and chief executive Matt Shattock and the current Beam management team will continue to lead the business, which will be managed from Beam's headquarters outside Chicago, Illinois.

"I am delighted that we can announce this agreement with Beam, a company with a portfolio of leading global brands, including Jim Beam and Maker's Mark, and a strong global distribution network. I believe this combination will create a spirits business with a product portfolio unmatched throughout the world and allow us to achieve further global growth. We are particularly excited about the prospect of working more closely with Beam's excellent management and employees who will play an integral part in the growth of the business," Nobutada Saji, president and chairman of Suntory's board, said.

"This is a very exciting development that delivers substantial value for our stockholders and creates an even stronger global company with an excellent platform for future growth," said Matt Shattock, president and chief executive of Beam Inc.

"Our combined global routes to market will expand our joint distribution footprint, and the powerful innovation capabilities both companies have developed will be a significant advantage," Shattock continued. "Backed by the expertise and the financial resources of Suntory, the people of Beam look forward to working with the Suntory team to continue outperforming our global market and to building on the proud traditions and deep heritage of our brands across all the major spirits categories."

On completion of the transaction, Suntory and Beam aim to achieve growth in markets worldwide, including the United States, the world's largest spirits market, by leveraging a combined portfolio of strong brands, an expanded distribution network and fully sharing production and quality control know-how.

Suntory and Beam already have a successful business relationship under which Suntory distributes Beam products in Japan and Beam distributes Suntory's products in Singapore and other Asian markets.

Last year, privately-held Suntory floated its food and non-alcoholic drinks company, Suntory Beverage & Food, to raise money for overseas acquisitions.

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.

Since more than 90 per cent of Suntory's business is in Japan, the Beam business will continue to operate in the United States.

Beam has been viewed as an attractive takeover target since becoming a stand-alone public spirits company in October 2011.

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 per cent, or 20.8 million shares of Beam at the end of the third quarter.

Financial advisers in the deal are Mitsubishi UFJ Morgan Stanley for Suntory and Centerview Partners and Credit Suisse for Beam. Legal advisers are Cleary Gottlieb Steen & Hamilton LLP for Suntory and Sidley Austin LLP for Beam.