Suntory surprises City with £10bn price for Beam

Suntory, already owner of, among others, the Auchentoshan malt distillery, is a major player. Picture: Phil Wilkinson
Suntory, already owner of, among others, the Auchentoshan malt distillery, is a major player. Picture: Phil Wilkinson
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JAPANESE drinks giant Suntory yesterday toasted a $16 billion (£10bn) deal to buy American peer Beam in a move that creates the world’s third-largest spirits company and unites whisky brands including Bowmore, Laphroaig and Teacher’s under the same roof.

New York-listed Beam – best-known for its Jim Beam and Maker’s Mark bourbon labels – was spun-out from Fortune Brands in 2011 to make it a more attractive acquisition target.

Diageo – Scotland’s largest distiller and the owner of the Bell’s, J&B and Johnnie Walker brands – had been rumoured to be eying a joint bid for Beam with Suntory.

The price tag represents a 25 per cent premium to Friday’s closing price and is 20-times higher than Beam’s most-recent full-year operating profit.

Phil Carroll at Shore Capital said that the price tag had raised eyebrows in the City. Carroll told The Scotsman: “The price caught everybody by surprise. Hats off to Beam chief executive Matt Shattock – he’s created a lot of value for shareholders since the company was spun out from Fortune Brands.”

But Carroll does not think that Suntory’s recommended offer for Beam will give any read-across to the price tag that Diageo could expect to receive if it goes through with its sale of the bulk of Glasgow-based Whyte & Mackay, the distiller it stands to inherit if it completes its takeover of a controlling stake in India’s United Spirits.

Diageo said in November that it will sell most of Whyte & Mackay – including its grain distillery at Invergordon and its Fettercairn and Jura malt units – to satisfy concerns from the Office of Fair Trading over competition within the UK’s blended Scotch market. The firm proposes to hang on to the Dalmore and Tamnavulin malt distilleries.

Carroll added: “Japanese firms – Suntory, along with Kirin – have been highly acquisitive. From a Whyte & Mackay’s perspective, Beam will have been viewed as a much more broadly-based spirits business rather than a specific Scotch business. Suntory was prepared to pay a premium by the look of it.”

Cantor Fitzgerald analyst Mike Dennis agreed. He said: “Beam has been on the cards as a takeover target as part of the consolidation within the global spirits market. Suntory has been behind several bids now so it doesn’t surprise me that this one has gone through. The multiple Beam has been bought for wouldn’t be anywhere near being an indicator for Whyte & Mackay.”

Suntory bought Glasgow-based Morrison Bowmore Distillers in 1994 and already lists whisky labels including Auchentoshan, Bowmore, Glen Garioch and McClelland’s in its portfolio. In September, Suntory bought the Lucozade and Ribena soft drinks labels from pharmaceuticals giant GlaxoSmithKline for £1.35bn. It had raised $4bn in June from a partial stock market listing of a division containing many of its food and drink businesses, stoking rumours of a bid for Beam.

Fortune Brands joined forces in 2005 with French spirits giant Pernod Ricard – the owner of Chivas Brothers, Scotland’s second-largest distiller – to break up Allied Domecq, taking Ardmore, Laphroaig and Teacher’s as its prizes.