In the Spotlight - Suntory Holdings' US$16bn "Gamble" on Beam Inc
The deal was praised by most commentators
Suntory Holdings' corporate slogan is “Yatta Minahara”, which roughly translates as “go for it”, or “take a risk”, according to the New York Times.
That is exactly what the Japanese group has done after it was announced earlier this week that it has agreed to pay US$16bn for Jim Beam owner Beam Inc. Some commentators may have baulked at the high price - one of the most expensive ever in terms of EBITDA multiples. But most agreed that the “once in a lifetime gamble”, as the Suntory president called it, is worth the stake.
“Beam is the signal that Suntory has really arrived as an international player in the global drinks market,” the UK's Daily Telegraph said after the deal was unveiled on Monday (13 January).
One analyst told London's Financial Times that the price tag could be justified for “getting a seat at the table of the global spirits industry, which could lead to further deal flows”.
It should also, most commentators agreed, scare away competing bids from the likes of Diageo, which, as my just-drinks colleague James Wilmore also pointed out might have a diminishing interest in Beam's Bourbon brands as it focusses on what it already in owns in the category.
Meanwhile, Businessweek pinpointed Japan's “Abenomics”, prime minister Shinza Abe's economic model, as a motivator behind the deal.
“The yen is weakening and interest rates are low, so the company can borrow money at home to pay for the deal and then use dollar-based revenues from abroad to pay for it,” it said.
However, the FT highlighted another possible attraction: “Beam was likely the only available thing that Suntory could buy,” an M&A banker told it.
The long-term implications of Suntory's latest purchase drew some commentary, with some questioning how the group will deal with its new position as the world's third biggest premium spirits company.
“The biggest challenge for them is managing a global business portfolio and brand portfolio, which they haven't done in the past,'' an analyst for AT Kearney told the Wall Street Journal.
Whether the family-owned company has the international management experience is another question. According to the journal, it only has one non-Japanese director out of 34. Suntory should “allow Beam's management to lead global business activities”, an analyst told it.
Not everyone was happy with the deal. In the US, some asked why a Japanese firm had been allowed anywhere near blue-collar American icon Jim Beam. As one consumer reportedly wrote on Jim Beam’s Facebook wall: “I am officially a Jack Daniel's drinker now.”
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