Whisky Advocate

Suntory Bids For Beam

January 13th, 2014

Author - Lew Bryson

It was revealed today that Beam, the all-spirits company spun off by Fortune Brands in 2011, has agreed to be acquired by Suntory for $13.62 billion, upon approval from Beam Inc. shareholders. Suntory already distributes Beam’s products in Japan, and Beam distributes Suntory’s products in several other Asian markets. The deal is targeted for completion in the second quarter of 2014.

Given numbers from the Impact Databank, the deal will make Suntory the world’s fourth-largest spirits company, behind Diageo, India’s United Spirits Limited, and Pernod Ricard; Bacardi will now be fifth. By dollar amount, this is a bigger deal than the Fortune Brands/Pernod takeover of Allied Domecq in 2005.

Assuming the deal goes through, this will put a lot of new whiskeys under Suntory’s roof. In addition to their own Suntory, Yamazaki, and Hakushu brands, and Scottish brands Bowmore, Auchentoshan, Glen Garioch, and McClelland’s, they will now own all the associated Jim Beam brands, Maker’s Mark, Canadian Club, Laphroaig, Ardmore, Teacher’s, Alberta Distillers, Cooley, and the Spanish DYC brand. They’ll also own the still-growing Pinnacle flavored vodkas, Courvoisier cognac, Sauza and Hornitos tequilas, Gilbey’s, and Skinnygirl cocktails.

What’s this mean to you, the whiskey drinker? Probably not much. Beam CEO Matt Shattock and the current management team will be left in place to run the business. Bourbon, Irish, Canadian, and Scotch whisky are all growing strongly. Given Suntory’s record with Morrison Bowmore, it seems unlikely that they’d change anything with their new acquisitions. Should we worry about Suntory owning both Bowmore and Laphroaig, and possibly closing one Islay distillery as unwelcome internal competition? Not for now, when both are selling well, though it may become a factor if there’s a downturn; but in that case, everything is going to be in play anyway.

The deal will increase Suntory’s debt load considerably; Moody’s Investors Service indicated that they would be evaluating the company for a re-grading in light of it. Should we worry about prices going up to cover the debt? Realistically, at this point in the whisky market…would we notice?

This was a sale that everyone interested in the industry had been expecting, at least on the “Beam sold” end. As a purely spirits company that was neither family-owned nor large enough to fend off purchasers, Beam was widely considered as a very likely takeover target. The “Suntory acquired” part was more of a surprise, in that one company is swallowing them whole. That’s the only potential downside; that a richer purchaser might have been able to put more into the new brands than Suntory will, but that’s all speculation.

In the end, it looks like a ‘move along, nothing to see here’ moment. Just another swapping in the game that has gone on for decades. Suntory has a good track record; rest easy. We might even see more Suntory whiskies in the world market.

Meanwhile, in a much, much smaller deal that was also announced today, two Tasmanian distilleries are merging. Lark distillery will acquire Old Hobart distillery and the Overeem brand. Both companies will remain as separate brands and entities, Overeem becoming a wholly owned subsidiary of Lark. Perhaps more importantly, Bill Lark will be reducing his time at the distillery and becoming the Lark global brand ambassador, and Casey Overeem will be doing the same. We’ll wait to see if this means more Tasmanian whisky in America.

10 Responses to “Suntory Bids For Beam”

  1. Tadas A says:

    Suntory Holdings Limited fiscal year 2012:
    Net sales 1,851,567 ¥ million (approx. $18 billion),
    Net income: 36,631 ¥ million (approx. $355 million),
    Cash and cash equivalents at FY2012 end: 228,110 ¥ million (approx. $2.2 billion)

    I would say, quite a bit of burden for a such size company to pay out $13.6 billion. Suntory stockholders will want to earn back money from the acquisition sooner than later 😀 Which means price increases, portfolio realignment, cutting business costs, etc.

  2. Rick Duff says:

    Canadian Club is a hidden gem here for Suntory. CC sells very well in Japan and that will be extra profit now for Suntory.

  3. B.J. Reed says:

    Hopefully Bowmore and Laphroig will both thrive here – I worry about events like occurred in the 90s and the impact mergers had on Islay distilleries like Ardbeg.

  4. Louis says:

    Bowmore prices have shot up in recent years, by 50% for the 15 and 18. The Tempest has been overpriced from the beginning. Suntory Yamazaki 12 and 18 year old prices have doubled, although the latter may be supply related. Not good news for Jim Beam products. Better stock up on Bakers, Bookers and and Knob Creek.

  5. Jon says:

    Another American Institution goes to Asia… It Sucks.

  6. Frank Murphy says:

    Dry yer eyes Jon. They can’t move the distilleries out of the countries. In any case, the chances of the shareholders in any globally operating company being 100% from one country are slim, to put it mildly.

    • Tadas A says:

      Frank, there is a huge difference where the company is based at. It is like a difference between a kid who was adopted for monetary reasons and a parent’s real kid. Company that is based in US has long terms plan that are benefitial to the country. Foreign companies are interested only in $$$, milking profits and sending them outside the country. Especially Japan, a country with one of the most anti-foreign product import practices. Have you ever tried to import a foreign product to Japan?

  7. Jonny McCormick says:

    They’ve missed a trick here. I think they should have merged to become “Sunbeam” – golden whiskey that puts a smile on your face.

  8. Lew Bryson says:

    From Shanken News Daily this morning:

    Suntory’s proposed $16 billion acquisition of Beam Inc. is being targeted by at least two lawsuits brought by Beam shareholders, both of which assert that Beam’s board has accepted a price that undervalues the company. One lawsuit seeking to nix the blockbuster deal was filed in Illinois state court by Beam shareholder Todd Miller, Bloomberg reports, while another was filed in Delaware Chancery Court by shareholder Carol Chichester, according to Law360. The latter suit claims that the $425 million breakup fee included in the deal, among other conditions, tilt unfairly to Suntory’s advantage, and “are calculated to unreasonably dissuade potential suitors from making competing offers.” Beam has denied any wrongdoing in the matter.

  9. Mark Watson says:

    I do NOT drink Jim Beam!

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