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Japan’s Suntory To Acquire Beam Inc. For $16 Billion, Creating Fourth-Largest Spirits Player

January 13, 2014

Japanese drinks group Suntory Holdings has agreed to acquire Beam Inc. in a transaction worth $16 billion. Expected to close in the second quarter of 2014, the acquisition is subject to shareholder and regulatory approval. The accord, whose price represents a premium of 25% over Beam’s closing price on January 10 and a multiple of more than 20 times EBITDA, will create a global drinks player with $4.3 billion in annual revenues.

According to Impact Databank, the deal will create the fourth-largest global spirits player by volume, at 54 million cases, pro forma, for 2012. Diageo at 126 million cases, United Spirits Limited (USL) at 125 million cases and Pernod Ricard at 123 million cases remain the top three, with Bacardi fifth at 38 million cases. (Diageo currently owns a minority stake in USL and is fighting in the Indian courts for control.) Beam was formerly the fifth-largest premium spirit company worldwide, with volume of 37.5 million cases in 2012. Suntory previously ranked among the top 15 spirits companies on its own, and is also the world’s 14th-ranked brewer, with volume of 14.4 million hectoliters in 2012.

With the addition of Beam, Suntory will gain Jim Beam, Maker’s Mark and Knob Creek Bourbons, Teacher’s and Laphroaig Scotch whiskies, Canadian Club whisky, Courvoisier Cognac, Sauza Tequila, and Pinnacle vodka. Suntory’s existing spirits portfolio includes Japanese whiskies Yamazaki, Hakushu, Hibiki, and Kakubin, Bowmore Scotch whisky and Midori liqueur. Suntory and Beam already cooperate globally, with Suntory distributing Beam products in Japan and Beam handling Suntory’s products in Singapore and other Asian markets.

Beam’s president and CEO Matt Shattock and the current Beam management team will continue to lead the business, which will be managed from Beam’s headquarters outside Chicago, Illinois. “With particular strength in Bourbon, Scotch, Canadian, Irish and Japanese whisk(e)y, the combined company will have unparalleled expertise and portfolio breadth in premium whisk(e)y, which is driving the fastest growth in Western spirits,” Shattock said. “Our combined global routes to market will expand our joint distribution footprint, and the powerful innovation capabilities both companies have developed will be a significant advantage.”

Considered an attractive takeover target ever since splitting from former parent Fortune Brands in 2011, Beam had steadfastly maintained that its ambition was to continue growing as an independent, even as rumors swirled that its Bourbon and Tequila brands in particular represented attractive assets to larger peers like Diageo and Pernod Ricard.

The swoop by Suntory—among the largest-ever spirits industry deals, outstripping Fortune’s and Pernod’s 2005 joint purchase of Allied Domecq for $14 billion—continues a period of intense acquisition activity on the part of Japan’s major drinks companies, which also include Kirin, Asahi and Sapporo. Among other deals, Kirin took control of Brazilian brewer Schincariol for $2.6 billion in 2011, and Suntory bought Europe’s Orangina Schweppes for a rumored $3.8 billion in 2009.

As early as a year ago, there was speculation that Diageo and Suntory could make a joint play for Beam. At the time, analysts suggested that Beam would be too much for Suntory to swallow on its own. But Japan’s domestic market remains sluggish, and this latest deal shows that the country’s drinks majors continue to see foreign investment as an increasingly urgent necessity.

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