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Whisky brands sold in £10bn Suntory swoop

JAPANESE drinks giant Suntory has moved to snap up Scotch whisky brands Teacher's, Laphroaig and Ardmore in a $16 billion (£9.8bn) agreed takeover of New York-listed Beam.

FINE ART: Mike Keiller, who heads up Glasgow-based Morrison Bowmore, checks how the distilling process is going.
FINE ART: Mike Keiller, who heads up Glasgow-based Morrison Bowmore, checks how the distilling process is going.

The transaction, which comes shortly after spirits giant Beam and Suntory were touted as potential bidders for Whyte & Mackay, will massively increase Suntory's already large presence in the global spirits sector.

It further highlights the appetite among global companies to invest in Scotch as demand for the spirit continues to grow around the world.

As well as Teacher's, a blended Scotch, and malts Ardmore and Laphroaig, Suntory will add Courvoisier Cognac, Souza Tequila, Canadian Club whisky and Midori to its stable, swelling a portfolio which has included Morrison Bowmore since 1994. The Glasgow-based distiller, headed by chief executive Mike Keiller, includes the Auchentoshan, Bowmore and Glen Garioch malts.

The Beam acquisition also gives Suntory a significant footprint in the lucrative American whiskey market by gaining the Jim Beam, Maker's Mark and Knob Creek bourbons.

Suntory is already the owner of a range of respected Japanese whiskies, having founded the Yamazaki distillery, the country's first, in 1923.

Its move for Beam comes two years after reports linked Suntory and Diageo with a joint bid for the firm, which achieved revenue of US$2.5bn from the sale of 38 million nine-litre cases in 2012.

The deal values Beam at $83.50 per share, representing a 25% premium on its closing price of $66.97 on January 10. Beam shares soared after the deal was announced yesterday.

The sale price is also more than 20 times higher than Beam's EBITDA (earnings before interest, taxation, depreciation and amortisation) for the 12 months to September 30.

Suntory said the combined entity generates net annual spirit sales of more than US$4.3bn.

The deal has been approved by the directors of both Suntory and Beam. It is expected to be concluded in the second quarter of this year.

Alan Gray, whisky analyst at Sutherlands Edinburgh and author of the Scotch Whisky Review, noted there had been "rumours" Beam might be for sale after it spun out from Fortune Brands in 2011.

He expressed some surprise that Suntory had made the move, given how long it had been since it last made an acquisition of this magnitude. But he said: "They might not have been the first one on my list to do it, but when you think about it they are a huge worldwide group and clearly they have ambition.

"There were only a handful that would be big enough to do it and they would have been one of them."

Teacher's and Laphroaig joined the Beam portfolio in 2005 after Fortune had teamed up with Pernod Ricard to acquire Allied Domecq.

The two brands are distributed by Maxxium UK, the sales alliance owned jointly by Beam and Edrington. Teacher's is produced at the Glen Turner grain distillery and bottling hall near Livingston.

Asked whether the Beam deal would rule out Suntory bidding for Whyte & Mackay, which Diageo is seeking to largely offload to address competition concerns, Mr Gray said it was "not impossible" it could still be in the running.

He said: "If they are spending US$16bn [on Beam] that is infinitely more than whatever Whyte & Mackay will go for.

"Having said that, companies tend not to do too many things at once simply because, although they can afford it, it does take a lot of time to get these things bedded [in].

"On balance it probably makes it less likely, but I wouldn't totally rule it out. Given Suntory already has Morrison Bowmore... it significantly changes the whole dynamic.

"If you then just look at it from a Scotch whisky perspective, you have got Morrison Bowmore, Teacher's and Laphroaig.

"You can easily see Whyte & Mackay fitting into that quite well."

Suntory said Beam's president and chief executive Matt Shattock and his team will continue to run Beam from its headquarters in Chicago.

Nobutada Saji, president and chairman of the Suntory board, said: "I believe this combination will create a spirits business with a product portfolio unmatched throughout the world and allow us to achieve further global growth.

"We are particularly excited about the prospect of working more closely with Beam's excellent management team and employees who will play an integral part in the growth of the business."

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