Headquartered in Deerfield, Beam Inc. recently announced its plan to redeem $2.67 Convertible Preferred Stock of the holders of record as of November 15, 2012, on November 20, 2012. The $2.67 Convertible Preferred Stock was originally issued in 1979 and approximately 97% or more of the holders have converted their Preferred Stock into common stock.
The outstanding convertible preferred stock, as of November 15, 2012, will be redeemed at an aggregate price of $31.02 per share, including $0.52 per share as dividend.
Beam declared that after the redemption of shares, all the rights of the holders of preferred stock will cease to exist and no more dividend payment will accrue on such stock. The holders can only ask for the tender price of the redeemed shares.
Beam noticed that out of 5.5 million shares originally issued, only 145,948 shares are outstanding and it would be logical to eradicate these second-class shares. The company expects that this plan will have no impact on earnings.
Beam further anticipates that the remaining holders of the $2.67 Convertible Preferred Stock will wish to convert their preferred stock into common stock seeing the financial benefits of conversion. As a result, the company announced that the shares can be converted till November 15, 2012 at a conversion ratio of 8.411 shares of Beam common stock for every one share of $2.67 Convertible Preferred Stock.
The holders who convert their stock will receive Beam common stock with a market value of $491.29, assuming the market price at $58.41 per share on the date of conversion. The company will pay cash to compensate for a fractional share.
Beam, the Deerfield, Illinois-based spirits giant, engages in producing and selling branded distilled spirits products worldwide. Globally, the company generated 2011 sales of about $2.8 billion on volume of 34 million 9-liter cases.
Beam, which competes with Diageo plc (DEO - Analyst Report) and Brown-Forman Corporation (BF.B - Analyst Report), carries a Zacks #2 Rank, implying a short-term Buy rating on the stock. However, the company retains a long-term ‘Neutral’ recommendation.