BEAM & Suntory: Not a Foreign Concept
Monday, Jan 13, 2014 | We all woke up this morning to our phones buzzing with the pre-market news – BEAM Global is being acquired for $16 Billion. The announcement was around 6:15 am EST, and with that, we knew we were in for a long day. Throughout The Bourbon Review‘s social channels, the sense of shock is almost audible, and seemed to carry a general tone that today’s announcement was a dire forecast for the Bourbon industry. Someone even quipped, “Is this the day Bourbon died?” Tongue in cheek perhaps, but it couldn’t be further from the truth. One reader inquired, “As a [Maker’s] Ambassador, does this mean I have diplomatic immunity?” This acquisition is actually a positive milestone for the Bourbon industry, and will prove to be a move that further cements the success of America’s native spirit.
At $16 bn, including net debt, this takeover rivals the largest deals in the spirits industry, but still falls short of the 2005 Pernod deal ($17.8 bn). For Suntory, however, this is a large takeover, given 2012 sales of $17.6 bn. The merger will create the world’s 3rd largest spirits company, according to Bloomberg.
Monday’s joint announcement detailed the agreement under which Suntory will acquire all outstanding shares of Beam for $83.50 (USD). Given the share-price valuation premium (25% to Beam’s closing price on January 10th, 2014), this suggests there is long-term value creation from such an acquisition. Chuck Cowdery suggested there were few redundancies, when you look at both portfolios. “[S]ince the footprints of the two company overlap very little – unlike an acquisition by Diageo or Pernod – there will be not much upheaval in the industry overall. Shattock will continue in place…. everyone going on with business as usual, at least for the near term.” Cowdery’s point speaks to Suntory’s overall desire to include North American whiskey & tequila in their quiver. When asked about non-US ownership, Cowdery said the trend was long-established. “That ship has pretty much already sailed… Everybody is going to be global and it may not really matter where the corporate headquarters is.”
Given the era of Japanese stimulus (dubbed “Abe-nomics”, after premier Shinzo Abe), one is left to wonder if this acquisition could have been predicted. Acquisition financing comes from Suntory cash and financing provided by The Bank of Tokyo-Mitsubishi UFJ. Given the status of being Japan’s largest bank, they play a role in Japan’s quantative easing policies. The Japanese government has pledged unparalleled fiscal stimulus to achieve inflation target of 2%. The program includes monthly asset purchases of $60 bn (USD), which rivals the US Federal Reserve’s quantitative easing in scale. While the US government’s bond-buying has recently begun the predicted “tapering”, the Japanese government’s programs are relatively younger and are only in their second year. While the spirits industry will continue to digest this announcement, this deal could hark other Japanese stimulus-financed takeovers for 2014.
Official requests for comment to Beam Global are still outstanding, but the press release included other background information.
Select Quotes from Beam Global & Suntory:
– “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,” Suntory Chairman Nobutada Saji said in a statement.
– Jim Beam and other brands will join Suntory’s own products, which include Japanese whiskies Yamazaki, Hakushu, Hibiki and Midori liqueur. The combined company will be No. 3 in global premium spirits.
– “With particular strength in Bourbon, Scotch, Canadian, Irish and Japanese whisky, the combined company will have unparalleled expertise and portfolio breadth in premium whisky, which is driving the fastest growth in Western spirits,” Shattock said.