Monday, 13 January 2014

It's Suntory time!

I just seem to be writing up M&A deals today.  Interesting.

The latest deal creates one of the world's largest premium spirits companies and - to add some international excitement - it is cross-border.  As Bloomberg puts it:

Suntory Holdings Ltd., the closely held Japanese whiskey and beer maker, said it will buy Beam Inc. (BEAM) for $16 billion to gain brands such as Maker’s Mark whiskey and create the world’s third-largest premium spirits company.

Shareholders in the Deerfield, Illinois-based maker of Jim Beam and Canadian Club liquor will receive $83.50 in cash per share, the Tokyo-based company said today in a statement. That compares with Beam’s last closing price of $66.97.

That's a 25% premium.  On my numbers Suntory is paying getting on for x20 EV/ebit for Beam.  A big price even when adjusted for the company's strong brands...

...and strong strategic international geographic positioning:

Well done to any Beam shareholders.

At a little under half the Suntory bid valuation for Beam, no wonder another branded spirits Remy Cointreau has its shares up 5% today (as I write).  Below Euro60 there is still good value here as I talked about early in the year (link here). 

Buying quality branded businesses is usually a good move.  Suntory are experienced operators and will anticipate material synergies, especially in distribution.  They have paid up though.

For the ordinary investor though, the big takeaway is to find strong brands that are - for whatever reason - out of favour.  That's still Remy Cointreau in the spirits sector today, with the shares having a poor last year (and trading not too far off 3 year lows).


No comments:

Post a Comment