Osaka, Japan-based Suntory Holdings Ltd. and Deerfield, Ill.-based Beam Inc. jointly announced that they have entered into a definitive agreement under which Suntory will acquire all outstanding shares of Beam for $83.50 a share. This translates to a total consideration of approximately $16 billion, including the assumption of Beam’s outstanding net debt. The transaction consideration represents a 25 percent premium to Beam’s closing price of $66.97 on Jan. 10, 2014; a 24 percent premium to the volume-weighted average share price during the last three months; and a multiple of more than 20 times Beam’s earnings before interest, taxes, depreciation and amortization for the 12-month period that ended Sept. 30, 2013.
The transaction, which was unanimously approved by each of the 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.
The transaction will create a stronger global player in premium spirits with annual net sales of spirits products exceeding $4.3 billion, the companies say. Its combined portfolio of alcohol brands will include Beam’s 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 along with Suntory’s Yamazaki, Hakushu, Hibiki and Kakubin Japanese whiskies; Bowmore Scotch whisky; and Midori liqueur. Beam President and Chief Executive Officer Matt Shattock and the current Beam management team will continue to lead the business, which will be managed from Beam’s current headquarters.
Nobutada Saji, president and chairman of Suntory’s board, said in a statement: “I am delighted that we can announce this agreement with Beam, a company with a portfolio of leading global brands, including Jim Beam and Maker’s Mark, and a strong global distribution network. 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. We are particularly excited about the prospect of working more closely with Beam’s excellent management and employees who will play an integral part in the growth of the business.”
Beam’s Shattock added in a statement: “This is a very exciting development that delivers substantial value for our stockholders and creates an even stronger global company with an excellent platform for future growth. Together we will be a global leader in distilled spirits with the No. 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.
“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,” he continued. “Backed by the expertise and the financial resources of Suntory, the people of Beam look forward to working with the Suntory team to continue outperforming our global market and to building on the proud traditions and deep heritage of our brands across all the major spirits categories.”
Suntory and Beam already maintain 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 assures stockholders that this deal will offer substantial value to them as well. “The attractive valuation, which has been achieved for Beam stockholders, is a result of the successful strategy and excellent execution by the worldwide Beam team,” said Beam Chairman David Mackay in a statement. “Indeed, Beam will have achieved a total shareholder return of 106 percent since Beam became a standalone spirits company in October of 2011.”
Suntory intends to fund the transaction through a combination of cash at hand and fully committed financing provided by The Bank of Tokyo-Mitsubishi UFJ. Mitsubishi UFJ Morgan Stanley is acting as exclusive financial adviser to Suntory, and Cleary Gottlieb Steen & Hamilton LLP is acting as legal adviser. Centerview Partners and Credit Suisse are serving as financial advisers to Beam, and Sidley Austin LLP is serving as legal adviser.