Monday, January 13, 2014
It's Suntory Time For Beam Inc
It was announced early this morning that Suntory Holdings has agreed to acquire Beam Inc. in a transaction worth $16 billion. The deal is still subject to shareholder and regulatory approval, though no major obstacles are anticipated. It's a good day to own Beam Inc. stock, as the sale price represents a premium of 25 percent over the closing price of Beam’s stock on Friday. That's what this is about, maximizing shareholder value.
The new entity will be world's fourth-largest distilled spirits company (Beam had been #5), after Diageo, USL, and Pernod. The next bombshell may be a hook-up between #1 and #2, which Diageo is trying to make happen, an effort that is now in the Indian courts.
The footprints of Beam and Suntory overlap so little that it's hard to see why or how anything should change, at least in the short term. According to Shanken News Daily, Suntory and Beam already partner globally, with Suntory distributing Beam products in Japan and Beam handling Suntory’s products in Singapore and other Asian markets. It has already been announced that Matt Shattock, Beam's president and CEO, will remain in his Deerfield office (just outside of Chicago) running the Beam operation.
Certainly no one in Kentucky need worry about their jobs. If anything, they have become more secure as Suntory will help ensure that Jim Beam, Maker's Mark, and the other Beam bourbons continue to perform strongly in Asia, where bourbon has been enjoying its greatest sales growth.
Remember too that U.S. law is absolute that bourbon whiskey must be a product of the United States. Unlike automobiles or televisions, you cannot import bourbon into the United States. It must be made here.
Few American whiskey consumers have ever seen, tasted, or heard of Suntory's Yamazaki, Hakushu, Hibiki, and Kakubin brands, but Suntory already owns Bowmore Scotch and Midori liqueur, both of which are widely sold here.
If Americans know Suntory at all, it is from the 2003 film "Lost in Translation" starring Bill Murray and Scarlett Johansson.
The reality is that there is no bourbon industry. There is a worldwide distilled spirits industry, in which bourbon whiskey is one product category. Ultimately, everyone will sell everything everywhere and it may not really matter where the corporate headquarters is located.