Monday, December 10, 2012

Industry Giants Looking to Buy Beam?

From Shanken:

With the Beam Inc. portfolio enjoying marked growth of late after years of lackluster results, some of the spirits industry’s biggest names are said to be looking to make a play for Beam, either individually or in tandem. In recent months, four of the world’s biggest spirits marketers—Diageo, Pernod Ricard, Bacardi and Suntory—have kicked the tires on a Beam acquisition, according to both press reports and industry analysts.

One thing is certain: Beam wouldn’t come cheap. The Sunday Telegraph reported yesterday that Diageo held talks earlier this year with Japanese drinks giant Suntory about jointly acquiring Beam for more than $10 billion. Lacking a major Bourbon brand, a Beam buy would in all likelihood give Diageo Jim Beam, the world’s top-selling Bourbon (though it’s considerably smaller than archrival Jack Daniel’s, technically a Tennessee whiskey), while a partner such as Suntory could take on many of Beam’s other brands, thereby easing Diageo’s competition and cost concerns.

Both Diageo and Suntory are also said to have explored the possibility of a Beam deal with other parties, such as private equity firms. With Diageo agreeing in recent weeks to acquire majority control of India’s United Spirits Ltd. for as much as $2.1 billion, and also in long-running negotiations to purchase Jose Cuervo Tequila for around $3 billion, any play for Beam by the world’s biggest spirits marketer is almost surely not imminent. Diageo declined to comment on any talks regarding Beam.

Meanwhile, Pernod Ricard and Bacardi—the world’s third- and fifth-largest spirit marketers, respectively, according to Impact Databank—have also expressed interest in fourth-ranked Beam, according to analysts. Again, both because of the cost of such a deal, and the competition concerns that would inevitably arise if either company took on Beam’s entire portfolio, any move from Pernod or Bacardi would most likely be in the form of a joint bid.

Since becoming a standalone entity after splitting off from parent company Fortune Brands little more than a year ago, Beam has thrived. Its spirit sales rose by 6.7% to 37.5 million cases last year, according to Impact Databank, and its comparable net sales were up by 7% for the first nine months of 2012, with key brands Jim Beam, Maker’s Mark, Sauza, Pinnacle, Courvoisier, Canadian Club and Teacher’s all on the rise.


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