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Monday, January 13, 2014

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

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.

News Briefs:

•As part of its ongoing international expansion, Campari’s Aperol Italian liqueur has been named the official global spirits partner of the Manchester United soccer team from January 1 through the end of the 2016-2017 season. The brand will be prominently advertised on the digital ad boards during Premier League, FA Cup and Capital One Cup home matches, as well as match day programs. Aperol ads will be featured in the Manchester United monthly magazine, the television channel MUTV and on the club’s official website. Visitors to the Old Trafford stadium will also be able to purchase Aperol in hospitality areas. Aperol, which has been seeing double-digit growth in the U.S., is now Gruppo Campari’s largest brand by sales value. Globally, its volume stands at more than 2.6 million cases, according to Impact Databank.

•Leo Trentadue, patriarch of a prominent Alexander Valley winemaking family and founder of a respected wine brand, died of heart failure Jan. 5 at home in Geyserville, Calif., Wine Spectator reports. He was 88. Trentadue had an aptitude for viticulture and a particular fondness for old vines. The Trentadue family owns one of Alexander Valley’s oldest vineyards, Whitton Ranch. The 7-acre site was planted with Carignane, Petite Sirah, Grenache and Alicante Bouschet in the 1880s. Since 1966, Trentadue has sold the grapes to Ridge Vineyards for their Geyserville Zinfandel blend. “Leo was extremely dedicated. We never had to talk to him about quality,” Paul Draper of Ridge Vineyards told Wine Spectator. Trentadue, along with Draper, was one of the first to bring attention to Alexander Valley Zinfandel. Beyond his loyalty to old vines, Trentadue often experimented with viticulture techniques, and is regarded as the first to bring advanced irrigation practices to vineyards.

•San Francisco’s Anchor Distilling Co. has appointed Gregory Fitch regional manager, control states, effective January 1. In his new role, Fitch will work closely with Anchor’s state broker partners to drive sales and develop brand programs for Anchor’s portfolio in control states. Fitch, who has more than two decades of sales management experience, most recently served as president of Boston-based wine and spirits brokerage Great Estates Inc. Anchor Distilling’s artisanal spirits portfolio currently features more than 300 specialty products from 20 different countries, including the Hine Cognac, Glenrothes single malt Scotch, Pink Pigeon rum, Hirsh Bourbon, Karlsson’s vodka and Old Potrero whiskey brands, among others.

Craft Brewing and Distilling News:

•Oregon’s Deschutes Brewery is set to launch a variety of new and returning offerings and expand into new markets this year. Among the new initiatives, Deschutes will launch a new range of 22-ounce, year-round offerings—featuring newcomers Pine Mountain Pilsner and Armory XPA, and returning brew Cinder Cone Red—into select regions at the end of March, and debut a new Belgian-style Quad, Not The Stoic, as part of its Reserve Series. Concurrently, former limited release Fresh Squeezed IPA will roll out in March as part of the brewer’s year-round portfolio. Meanwhile, in addition to entering Ohio and Kentucky later this month, Deschutes says it plans to expand its presence in Pennsylvania with entry into Pittsburgh and Philadelphia in April, and is set to enter Wisconsin and Michigan by the end of 2014. The new markets will bring Deschutes’s reach to 27 states.

•Fort Collins, Colorado’s Odell Brewing is releasing a new variety pack, Winter-Spring Montage, which features its 90 Shilling, IPA, Runoff Red IPA and Wolf Picker brews. Wolf Picker, a newcomer, is an American Style Pale Ale brewed with two experimental hops varieties. Runoff Red IPA, meanwhile, is a returning seasonal (formerly known as Red Ale). Dry-hopped with American hops to give it a fruity citrus aroma, Runoff Red will also be sold in six-packs. The Montage packs will be available in Odell’s 10-state distribution footprint from January 13.

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