The acquisition of the world’s fourth largest spirit company, Beam Inc. , by Japanese beverage company, Suntory Holdings Ltd., has moved a step further after the former’s shareholders gave their formal approval yesterday. The transaction will expectedly close by the end of April.
Prior to this, at the beginning of March, the Deerfield, IL-based spirit maker got an important regulatory approval from the U.S. Federal Trade Commission, which granted it an early termination of waiting period for review of the transaction under the Hart-Scott-Rodino Act, also known as HSR Act. Hence, as of now, Beam has to get the nod from the European Union.
The HSR Act restrains companies from completing certain mergers, acquisitions and transfer of assets or securities, until all the necessary documents are filed with the U.S. Federal Trade Commission and Department of Justice.
On Jan 13, Beam had signed a deal to be acquired by Suntory in an all-cash transaction. Suntory Holdings offered $83.50 per share to buy all outstanding shares of the American manufacturer of spirits. The total buyout amount, including Beam’s net debt, is approximately $16 billion.
The Japanese beverage company’s offer price is 25% higher than Beam’s closing price of $66.97 on Jan 10. Moreover, the valuation comes at a multiple of 20 times of Beam’s twelve-month earnings before interest, taxes, depreciation and amortization (EBITDA) ended on Sep 30 last year and a premium of 24% to the last three months volume-weighted average share price.
After the deal is sealed, Suntory Holdings will become the world’s third largest whiskey company after Diageo plc (DEO - Free Report) and Pernod-Ricard SA, and will reap annual revenues of about $4.3 billion.
The alcoholic beverage industry has been witnessing major consolidation in recent times. In Jan 2014, Anheuser-Busch InBev SA/NV (BUD - Free Report) or AB InBev, in order to strengthen its position in the Asia-Pacific region, entered into an agreement with KKR and Affinity Equity Partners to reacquire its South Korean asset – Oriental Brewery – for a sum of $5.8 billion. Notably, it marked the second biggest alcohol transaction of 2014 after the Beam-Suntory deal.
Currently, Beam carries a Zacks Rank #2 (Buy). Another brewer worth consideration is Brown-Forman Corporation (BF.B - Free Report) with a Zacks Rank #2.