US: Diageo and Bacardi to team up for Beam Global?
Diageo and Bacardi could move for Beam Global Spirits & Wine
Speculation over possible suitors for the Jim Beam Bourbon producer has intensified after its parent group, Fortune Brands, said that it would separate its business into three standalone units. If the move goes ahead, Beam Global Spirits & Wine would be separated from Fortune's less attractive home and golf divisions.
Diageo is understood to be monitoring the situation. It does not have a Bourbon brand and the opportunity to acquire Jim Beam and Maker's Mark might be too tempting to resist. The drinks giant wants to increase its scale in North America and has the firepower for a deal.
However, Beam Global's portfolio is so diverse, including the likes of Courvoisier Cognac and Sauza Tequila, that Diageo's existing brands and tie-ups would probably preclude it from acquiring Beam Global outright.
That is where Bacardi could enter the fold, according to analyst group Bernstein, which rates the value of Beam Global's business at around US$9bn. Bernstein believes that there is a strong possibility of a Diageo, Bacardi agreement to buy and carve up Beam Global.
"We think it would make sense from a strategic standpoint as it would diversify its portfolio and we believe that Bacardi has balance sheet capacity as they previously participated in the V&S auction," said Bernstein.
"Although all major spirits houses are likely to be interested, we do not see a potential acquirer other than Diageo or Bacardi," it added. "We believe Pernod Ricard and Constellation are limited by their balance sheet as is Campari whilst Brown-Forman would face clear anti-trust issues in our view."
Many analysts strongly expect Beam Global's business to be subject to takeover offers. "Although Fortune Brands management intends to keep the distilled spirits business independent, we would be surprised if this was the case a year from now," said Evolution Securities.
It agreed that a Bacardi/Diageo combination "has the greatest chance of success" and added that a deal could give Diageo an "unassailable position" in the US. Beam Global is the third largest spirits company in the US, which accounts for around half of the global spirits profit pool.
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