Suntory Holdings Ltd, a family-owned Japanese maker of both alcoholic and soft drinks, struck a $16B deal to acquire BEAM Inc (NYSE:BEAM), the world’s fifth-largest spirits group by sales.
Suntory first to make whiskey in Japan
BEAM Inc (NYSE:BEAM) makes world-renowned bourbon whiskeys Jim Beam and Maker’s Mark, as well as Teacher’s and Laphroaig Scotch whiskeys. It also owns the Sauza tequila and Pinnacle vodka brands. Suntory was one of the first companies in Japan to make whiskey and owns the Yamazaki, Hakushu and Bowmore brands.
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Suntory’s acquisition of Beam is its third big-ticket acquisition in the drinks space after the 2009 deal to acquire French company Orangina Schweppes, and its £1.35B acquisition of drink brands Lucozade and Ribena from GlaxoSmithKline plc (ADR) (NYSE:GSK) (LON:GSK) last year. Suntory said the acquisition of Beam would catapult it to third position in the rankings of the largest spirits players in the world.
Suntory will pay $83.50 per share of BEAM Inc (NYSE:BEAM) in cash. At the time of writing Beam shares are trading at $83.25, up 24.31% from yesterday’s close. It will fund the acquisition through a mix of in-house cash and borrowings pre-arranged from The Bank of Tokyo-Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU) (TYO:8306). The transaction is likely to close in the second quarter.
Suntory raised $4B through an IPO last year. It has been making overseas acquisitions to counteract a lackluster domestic market plagued by poor population growth and economic woes. After the IPO, Nobuhiro Torii, the Chief Executive of the listed entity, Suntory Beverage & Food Ltd, made no secret of his plans to use the funds for overseas acquisitions, saying “…for us, the risk of not buying is higher than the risk of overpaying. We’ve often walked away from deals in the past.”
Torii said Suntory putting further acquisitions on hold
However, just last month, Torii said Suntory was putting further acquisitions on hold until it had integrated its previous acquisitions and expanded current operations. “I don’t think we have enough capacity or ability to pursue another opportunity at this point. At least I have to take a break for 12 months. (After that), if we deliver the plan in the next year, then our financial capability will grow,” Torri had told Bloomberg.
The group probably had a rethink on that considering the compelling dynamics of the BEAM Inc (NYSE:BEAM) acquisition. “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. Suntory and Beam already share a business relationship – While Suntory distributed Beam brands across Japan, Beam marketed Suntory drinks in Singapore and in other parts of Asia.