Analysis - Rival bids for Beam Inc unlikely
Suntory may have a clear run at Beam Inc
Suntory's proposed US$16bn takeover of Beam Inc is the first publicly-acknowledged attempt to buy the pure-play spirits company since it was formed out of Fortune Brands in 2011. But will it be the first and only chapter in this story?
Santander analyst Anthony Bucalo said today (13 January) that competing bids are unlikely and that the prize of Beam - which he says was created solely to be sold off - will go to the Japanese company. Both Beam's and Suntory's boards have unanimously approved the deal.
According to Bucalo, Pernod Ricard may be in desperate need of a footprint in North American whiskies but is currently hamstrung by its exposure to a slowing Asian market. It is, Bucalo said, “an opportunity lost” for the French group.
Diageo was reported to be interested in making a joint play with Suntory for Beam back in 2012, but refused to pay more than US$65 a share. Today's Suntory bid is in excess of US$85, which would lead one to assume it beyond Diageo's interest.
And, as Bucalo notes, other factors have changed too.
“Three years ago, we thought Diageo was the most logical buyer because of the holes in the Diageo portfolio in both Tequila and Bourbon. But Diageo now seems very pleased with the growth of Bulleit and Crown Royal in North American whiskey, and rightfully so.
"With the growth of speciality Tequila Don Julio, Beam made less and less sense for Diageo over time. Buying Beam would have created serious regulatory gymnastics along with the likely high premium needed to buy the business.”
Suntrust analyst William Chappel, meanwhile, said the high price of 25% above Friday's share price “should keep other offers at bay”. Chappel also highlighted the deal's $425m termination fee, which drops to $275m if a better offer is made before 26 February, as a further repellent.
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