Japanese firm to buy Jim Beam maker

FILE - This Oct. 3, 2012, file photo, shows the Jim Beam visitors center at its central distillery in Clermont, Ky. Beam, the maker of Jim Beam and Maker's Mark alcohol brands, has agreed to be acquired by Japan's Suntory Holdings Ltd. for approximately $13.62 billion. (AP Photo/Bruce Schreiner, File)
FILE - This Oct. 3, 2012, file photo, shows the Jim Beam visitors center at its central distillery in Clermont, Ky. Beam, the maker of Jim Beam and Maker's Mark alcohol brands, has agreed to be acquired by Japan's Suntory Holdings Ltd. for approximately $13.62 billion. (AP Photo/Bruce Schreiner, File)

NEW YORK - The maker of classic American liquors such as Jim Beam and Maker’s Mark has agreed to be purchased by a Japanese company for $13.62 billion in a deal that would create the third-largest global premium spirits business.

Shares of Beam Inc. rose 24 percent on Monday after it said that it agreed to be acquired by Suntory Holdings Ltd., a Japanese beverage company. The combined company would have annual sales of more than $4.3 billion.

A representative for Suntory declined to comment beyond the news release announcing the deal.

“Strategically, it makes sense for Suntory,” said Trevor Stirling, an analyst at Sanford C. Bernstein & Co. in London. “I’m a little surprised they decided to goit alone.”

The deal follows a number of acquisitions of alcohol brands in recent years, including Anheuser-Busch InBev’s $20.1 billion deal last year to buy the other half of Mexican brewer Grupo Modelo that it didn’t already own.

The acquisition also comes at a time when the taste for bourbon - a type of American whiskey that is made primarily of corn, aged in charred oak barrels and typically distilled in Kentucky - continues to grow both domestically and abroad.

Suntory’s offer is a “fair price,” and it is hard to predict if any other bidders will emerge, said Jack Russo, a St. Louis-based analyst at Edward Jones & Co. “They paid so much that they might actually have precluded others from joining the fray.

“This industry has been going through some consolidation, similar to other sin industries,” Russo said. “There’s not many pure-play alcohol companies left, so I think there was a scarcity value.”

In the U.S., sales volume for bourbon and Tennessee whiskeys such as Jack Daniels has grown 26 percent over the past decade, according to the Distilled Spirits Council, an industry group. Exports of U.S. whiskeys have grown to roughly $1 billion last year, more than double what they were a decade ago.

Demand is so robust that Beam last year even considered reducing the alcohol content for Maker’s Mark because of a supply shortage. The company scrapped the idea after a backlash by fans of the higher-end bourbon.

“We’re basically in the middle of a global whiskey renaissance,” said Frank Coleman, a spokesman for the Distilled Spirits Council.

Beam Chief Executive Officer Matt Shattock has recently tried to attract drinkers and boost revenue with flavored liquors, such as Pinnacle pumpkin pie vodka and maple bourbon. Net sales in the three months ended Sept. 30 fell 4.5 percent to $598.7 million as results in Beam’s Asia Pacific and South American regions lagged behind the company’s expectations.

Suntory and Beam already had a relationship. Suntory distributes Beam products in Japan and has a portfolio of spirits with whiskeys, including Yamazaki and Hakushu as well as Midori liqueur and other beverages. And Beam, which is based in Deerfield, Ill., distributes Suntory’s products in Singapore and other Asian markets.

Suntory President and Chairman Nobutada Saji said in a statement that the acquisition will help Suntory further its global growth. In recent years, Suntory has also purchased French beverage maker Orangina Schweppes Group and GlaxoSmith Kline’s Lucozade and Ribena drinks.

Beam spokesman Clarkson Hine said for now, the deal will result in few changes for fans of Beam’s bourbons. He also said that Beam, which was spun off as a stand-alone liquor company in 2011 from conglomerate Fortune Brands Inc., will continue with its current management.

“It’s business as usual,” Hine said, noting that Suntory has indicated it wants the company to “keep doing what we’re doing.”

Suntory will pay $83.50 per share, a 25 percent premium to Beam’s Friday closing price of $66.97. The companies put the deal’s value at about $16 billion, including debt.

Suntory plans to fund the deal with available cash and fully committed financing from The Bank of Tokyo-Mitsubishi UFJ. Both companies’ boards unanimously approved the transaction, which is targeted to close in the second quarter.

The deal needs approval from Beam Inc. stockholders.

Shares of Beam rose $16.45 to close Monday at $83.42.

Bloomberg News reported in December 2012 that Suntory had considered making an offer for Beam alongside Diageo, the world’s biggest distiller.

“Suntory has virtually no U.S. presence,” Mark Swartzberg, an analyst at Stifel Financial Corp. in New York, said in a research note Monday. “This will take their share from less than 1 percent to 11 percent.” Information for this article was contributed by Bruce Schreiner and Candice Choi of The Associated Press and by Clementine Fletcher, Leslie Patton and Tara Lachapelle of Bloomberg News.

Business, Pages 23 on 01/14/2014

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