The American Stillhouse is a gift shop on the grounds of the Beam Inc. distillery in Clermont, Ky. The $16 billion takeover of Beam by Japan's Suntory is the biggest this year and the sixth-largest ever in the industry, according to data compiled by Bloomberg.The American Stillhouse gift shop stands on the grounds of the Beam Inc. distillery in Clermont, Kentucky, U.S., on Thursday, Aug. 1, 2013. Beam Inc. is scheduled to announce earnings figures on Aug. 8. Photographer: Luke Sharrett/Bloomberg (Photos by Luke Sharrett / Bloomberg)
Suntory Holdings Ltd., the closely held Japanese whiskey and beer maker, agreed to buy Beam Inc. in a $16 billion deal to gain brands such as Maker’s Mark whiskey and 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.
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.
“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.”
Beam rose 24 percent to $83.05 at 10:09 a.m. in New York. The shares traded as high as $83.57, higher than the offer price, indicating some investors expected competing bids. Deerfield, Illinois-based Beam gained 11 percent last year.
The takeover would be the largest overseas acquisition by a Japanese company since Softbank Corp. acquired Sprint Communications Inc. for $21.6 billion in a deal announced in 2012. Fueled by a strong currency, Japanese companies embarked on an overseas buying spree that peaked with $113.5 billion worth of deals announced that year, 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 biggest 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.
Pernod Ricard SA, Europe’s second-largest spirits maker, is unlikely to make a counteroffer for Beam based on the valuation of the deal, said a person with knowledge of the matter.
Suntory’s offer is a “fair price,” and it is hard to predict if other bidders will emerge, said Jack Russo, a St. Louis-based analyst at Edward Jones & Co.
“This industry has been going through some consolidation, similar to other sin industries,” Russo said in a telephone interview. “There’s not many pure-play alcohol companies left, so I think there was a scarcity value.”
Beam Chief Executive Officer Matt 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.
Revenue growth will accelerate for U.S. liquor and spirits distillers as American consumer sentiment recovers in the five years up to 2018, according to a July report from researcher IBISWorld Inc. U.S. sales will increase 3.6 percent to $8.83 billion this year and jump 5 percent in 2015, the report says.
“Suntory has virtually no U.S. presence,” Mark Swartzberg, an analyst at Stifel Financial Corp. in New York, said in a research note Monday. “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.
Suntory is a household name in Japan, selling drinks from canned coffee to beer, sponsoring televisions shows, and operating its own art gallery and concert hall. Suntory Beverage & Food Ltd., the soft-drinks unit of Suntory Holdings, raised about $4 billion last year in Asia’s biggest initial public offering.
Suntory’s Japanese single-malt whiskeys now regularly win top international awards, and actor Bill Murray’s character in the 2003 film “Lost in Translation” introduced the name to filmgoers with the line, “For relaxing times, make it Suntory time.”