Suntory to Acquire Beam for $13.6 Billion
The world is developing a fresh taste for Kentucky bourbon.
In a $13.6 billion all-cash deal, Osaka, Japan-based beer and soft-drinks maker Suntory Holdings Ltd. agreed Monday to
buy Beam Inc., the owner of Jim Beam, Maker's Mark and Knob Creek bourbons and the second-largest maker of American
whiskey behind Brown-Forman Corp.
The acquisition would catapult family-owned Suntory from No. 15 in global liquor dollar sales to No. 3, behind only
U.K.-based Diageo PLC and France'sPernod Ricard SA, according to alcohol industry tracker IWSR. Beam, based in
Deerfield, Ill., currently is No. 4 globally.
Beam is positioned squarely in a part of the liquor business experiencing a powerful global upswing: bourbon whiskey.
The traditional American spirit is made mostly from corn, aged in charred oak barrels and typically hails from Kentucky.
Its popularity is building as some consumers grow tired of vodka, the top-selling U.S. spirit, and gravitate toward
distillers of brown spirits with more than century long domestic roots.
Long in the doldrums, U.S. bourbon has made a comeback in the past decade and production in 2012 rose above one
million barrels for the first time since 1973. Distillers have invested roughly $300 million to boost capacity since
2011. North American whiskey--including bourbon, Tennessee and Canadian whiskeys--accounted for more than half of the
total growth in the $21 billion U.S. spirits market in the 52 weeks ended Oct. 12, 2013, according to store tracker
Unlike vodka, a popular "white" spirit with roots in Europe, bourbon is quintessentially American and has been re-
popularized through television shows such as "Mad Men," which is set in the 1960s and features then-advertising
executives with rock glasses in hand.
Bourbon makers routinely play up their brands' long local histories. Beam traces its flagship bourbon to 1795, when
Jacob Beam sold his first barrel, the first of seven generations and 30 family members of master distillers. One of
them, James or "Jim" Beam, restarted production after Prohibition was repealed in 1933.
In recent years, dozens of tiny "craft" distillers have also sprung up across the U.S. to capitalize on the growing
thirst for brown spirits such as bourbon. Some bourbon brands--including Maker's Mark--have said they are struggling to
keep up with demand.
Publicly traded Beam has been considered an unusually large and ripe liquor acquisition target since being spun off in
late 2011 from Fortune Brands Inc., a conglomerate that owns Moen faucets, cabinet brands and Master locks.
The transaction would represent the third-largest deal ever in the highly fragmented liquor industry, according to
Dealogic, surpassed only by Vivendi SA's takeover of Seagram Co. in 2000 and acquisition of Allied Domecq PLC by Pernod
Ricard and Fortune Brands Inc. in 2005.
The deal also highlights Corporate Japan's growing thirst for acquisitions abroad amid weak growth prospects at home.
The transaction, unanimously approved by both companies' boards, would be the third-largest overseas acquisition by a
Japanese company, according to Dealogic.
Suntory, one of Japan's biggest beverage companies, also has the deep pockets to accelerate Beam's overseas
distribution at a time when bourbon is becoming increasingly popular in overseas markets, including Germany and
"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," said Nobutada Saji, president and chairman of Suntory.
American whiskey--led by Brown Forman's Jack Daniel's Tennessee Whiskey and Jim Beam--represented about two thirds of
the roughly $1.5 billion in U.S. liquor export sales in 2012. American whiskey exports likely posted another record year
in 2013 after growing 9.7% in 2012, according to the Distilled Spirits Council of the U.S., an industry group.
The combined company would have annual net sales of spirits products exceeding $4.3 billion. Its combined portfolio of
those brands would include Beam's bourbon brands; Courvoisier cognac; Canadian Club whiskey; and Sauza tequila. Suntory
brings to the party Japanese whiskeys Yamazaki, Hakushu, and others, plus Midori liqueur.
Matt Shattock, Beam's president and chief executive, and the current management team will continue to lead the Beam
business from the company's headquarters outside Chicago, Suntory said.
Suntory approached Beam with an unsolicited offer, said Clarkson Hine, Beam's chief spokesman, adding that Suntory's
offer represents "significant value for our shareholders and creates an even stronger global company," with few if any
The companies already are distribution partners. Suntory distributes Beam products in Japan, and Beam distributes
Suntory's products in Singapore and other Asian markets.
Suntory, one of Japan's biggest beverage companies by revenue, has been on an overseas acquisitions tear. Last July it
listed its food-and-beverage unit to raise money for deals, netting about $3.9 billion in Asia's biggest IPO of the
year. In September it agreed to buy GlaxoSmithKline PLC's Lucozade energy-drink brand and Ribena fruit-drink line brands
for about $2.11 billion.
Suntory also owns European soft-drinks company Orangina and New Zealand-based Frucor Group. It is a big brewer,
selling beer under the Suntory brand.
Unlike chief U.S. whiskey rival Brown-Forman, Beam isn't family controlled. Many other large liquor companies, like
rum maker Bacardi Ltd., are either family controlled or not publicly listed. That has kept a cap on big-bang deals in
the still-fragmented liquor industry. The four largest spirits companies have a combined 9% of global volume and 22% of
dollar sales, according to Bernstein Research. The four largest players in the beer industry by contrast control 47% and
49% of global volume and dollar sales, respectively.
Diageo and Pernod Ricard had long been considered as potential bidders for Beam and they or other companies could
still launch rival bids for Beam.
But many investors and industry watchers on Monday thought a competing offer is unlikely. Beam's share price on the
New York Stock Exchange ended Monday at $83.42, up 25% from Friday's close but slightly below Suntory's offer of $83.50
Including debt, the total deal is valued at $16 billion.
Any competing offer would have to clear at least one major hurdle: a $425 million termination fee attached to the
Suntory acquisition, although the fee would only be $275 million if a better deal were signed with a third party by Feb.
Citi Research analyst Vivien Azer argued in a research note Monday there are only "limited chances' of another buyer
emerging because Suntory and Beam's boards had already approved the deal and because of the large breakup fee.
A person close to Diageo said the chances were low that it would attempt to match Suntory's offer. The person pointed
to Diageo's recent acquisitions, all of which have been focused on emerging markets, as another indication that a bid
for Beam would be unlikely.
Suntory isn't the first Japanese company to target U.S. bourbon makers. Kirin already owns Four Roses, an American
Other big bourbon players in the U.S. include closely held Sazerac Co., whose brands include Buffalo Trace and Pappy
Van Winkle, and family owned Heaven Hill Distilleries Inc., which markets Evan Williams and Elijah Craig.
Peter Evans in London contributed to this article.
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