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Suntory Buying Jim Beam (BEAM) for $16 Billion

By  +Follow January 13, 2014 4:19AM
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With roots dating back before the Industrial Revolution, Jim Beam (BEAM) has long been America’s bourbon. Originally called “Old Tub” (the first bottle sold in 1795 by Jacob Beam was actually called “Old Jake Beam Sour Mash”), the Bardstown, Kentucky liquor survived whisky rebellions and Prohibition to grow into a multi-billion-dollar stalwart, producing not only its namesake brand and Maker’s Mark bourbon, but a bevy of other drinks, including cognac, vodka, tequila, rum and DeKuyper Cordials, to name a few.

It’s a far different world today than old Jake growing corn in a field and making whisky by his own hand 219 years ago. Now, Japan’s first whisky-maker says that it is buying Beam. No, not a bottle or a case; the whole company. Osaka-based Suntory Holdings Ltd, a privately held beverage behemoth and parent to Suntory Beverage, has agreed to acquire Beam for $83.50 per share in cash in a deal worth about $16 billion, including the debt that Suntory will assume.

Filmgoers may known of Suntory through Bill Murray’s 2003 film “Lost in Translation,” in which he states, “For relaxing times, make it Suntory time.” 

Suntory, which had 2012 sales of $17.6 billion, has a full portfolio of alcoholic and non-alcoholic beverages, including its flagship single malt whisky Yamazaki. Established in 1899 by Shinjiro Torii, Suntory became Japan’s first whisky producer with Yamazaki in 1923. The company joined the Tokyo Stock Exchange in the country’s largest IPO last year, trading under the symbol 2587.

The offer represents a 25 percent premium to Beam’s closing price of $66.97 on Friday and more than 20-times Beam’s earnings before interest, taxes, depreciation and amortization (EBITDA) for the year ended September 30, 2013.

Both companies’ boards have unanimously approved the acquisition. The transaction is expected to close in the second quarter.

Per the deal, Beam CEO Matthew Shattock along with the rest of his management team will stay on board to head the company's operations. Calling the development “very exciting,” Shattock said in a statement this morning, “Together we will be a global leader in distilled spirits with the #3 position in premium spirits and a dynamic portfolio across key categories. 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.”

Suntory is known for continued expansion through acquisitions, but the purchase of Beam is the largest in its history. Previously, the company bought Orangina Schweppes Group in 2009 for more than $3 billion. In September, Suntory bough the Lucozade and Ribena drink brands from GlaxoSmithKline (GSK) for $2.1 billion. Locozade is an energy drink that competes with Coca-Cola’s (KO) Powerade and Pepsi’s (PEP) Gatorade. Suntory also bought 51-percent of Pepsi’s Vietnam soft drink business in 2013.

With its relentless pursuit of expansion, Suntory is walking the walk, not just talking the talk of its slogan “Yatteminahare” (Go for it) put in place by its founder Torii many years ago.

Shares of Beam have jumped to near the acquisition price and are holding steady in the area in early Monday trading.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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