Pernod & Diageo unlikely to skew Suntory’s $16bn pitch for Beam

Counterbids from the likes of a surprised Pernod Ricard and Diageo to Suntory’s announced intention to acquire Beam Inc are unlikely.

It’s believed that Pernod Ricard will be feeling victim to a slowing Asian market while Diageo might envisage the price to be paid as being too high for the perceived benefit as it builds up its own portfolio combined with its focus on emerging rather than established markets.




Suntory Holdings Limited and Beam Inc recently announced their intention to enter into a definitive agreement under which Suntory will acquire all outstanding shares of Beam for a total consideration of approximately $16 billion including the assumption of Beam’s outstanding net debt.

The transaction, unanimously approved by each company’s board of directors, is expected to close in the second quarter of 2014 subject to Beam stockholders’ approval, regulatory approvals and other customary closing conditions.

This transaction represents the third-largest deal in the global liquor business after Vivendi SA’s takeover of Seagram in 2000 and Pernod Ricard’s takeover of Allied Domecq in 2005.

Beam Inc is the US’s second-largest American Whiskey producer behind Brown Forman and the fourth-largest liquor company by value in the world. Suntory is the 15th-largest liquor company in the world by value with sales of $17.6 billion in 2012 of which Spirits & Beer comprise 30%.

The Beam-Suntory transaction will create a premium spirits company with annual net sales of spirits products exceeding $4.3 billion, putting it behind Diageo in first place and Pernod Ricard in second.

Its combined portfolio of leading brands will include Jim Beam (with a 19% share of the global bourbon category), Maker’s Mark and Knob Creek bourbons, Teacher’s and Laphroaig Scotch whiskies, Canadian Club whisky, Courvoisier cognac, Sauza tequila (enjoying an 11% share of global tequila market) and Pinnacle vodka as well as Suntory’s leading Japanese whiskies Yamazaki, Hakushu, Hibiki, and Kakubin, Bowmore Scotch whisky and Midori liqueur.

Beam’s President and Chief Executive 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.

Beam enjoys a strong global distribution network and the acquisition will provide Suntory with a 11% share of the US spirits market where the Japanese company currently has just 1% and a 33% share of its Bourbon market.

The President and Chairman of Suntory’s Board Nobutada Saji claimed, "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.”

Beam’s Matt Shattock added, "Together we will be a global leader in distilled spirits with the Number 3 position in premium spirits and a dynamic portfolio across key categories. With particular strength in Bourbon, Scotch, Canadian, Irish and Japanese whisky, the combined company will have unparalleled expertise and portfolio breadth in premium whisky, which is driving the fastest growth in Western spirits”.

Suntory and Beam already have a successful business relationship under which Suntory distributes Beam products in Japan and Beam distributes Suntory’s products in Singapore and other Asian markets.

Beam became a standalone spirits company when it was spun off from its parent company Fortune Brands in October 2011.

Based in Japan, Suntory – which purchased GlaxoSmithkline’s Lucozade and Ribena brands for $2.11 billion only last year – intends to fund the transaction through a combination of cash-at-hand and fully committed financing provided by The Bank of Tokyo-Mitsubishi UFJ.

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