Suntory Holdings Ltd SUNTH.UL has agreed a $16 billion deal to buy Beam Inc (BEAM.N), making the Japanese company the world's third-largest maker of distilled drinks with a global footprint.
The company is paying $13.6 billion in cash for Beam shares as well as assuming its net debt, bringing together Beam's Jim Beam and Maker's Mark bourbons, Courvoisier cognac and Sauza tequila with Suntory's Yamazaki, Hakushu, Hibiki and Kakubin Japanese whiskies, Bowmore Scotch whisky and Midori liqueur.
It is the latest example of how Japanese drinks firms are seeking to quench their thirst for overseas growth as the population in their home market shrinks.
"All Japanese beverage companies have been focused on getting growth outside Japan," said Bernstein Research analyst Trevor Stirling.
Last year, privately held Suntory floated its food and non-alcoholic drink company Suntory Beverage & Food (2587.T), to raise money for overseas acquisitions. In 2011, Kirin Holdings Co (2503.T) bought control of Brazil's Schincariol for $2.6 billion and in 2009, Asahi Group Holdings (2502.T) took a stake in Chinese brewery Tsingtao.
Suntory said on Monday it will pay $83.50 per share in cash, a 25 percent premium to Beam's closing share price of $66.97 on Friday. Beam shares jumped 24 percent to $83.27 on Monday.
The price is more than 20 times Beam's earnings before interest, tax, depreciation and amortization (EBITDA), a multiple that comes close to the record 20.8 times EBITDA Pernod Ricard (PERP.PA) paid in 2008 for the maker of Absolut vodka.
But unlike the Absolut deal, there are very few cost-saving opportunities here, said Bernstein's Stirling, since over 90 percent of Suntory's business is in Japan and the Beam business will continue to be run in the United States.
Given the steep multiple, Stirling thinks a counter bid by the likes of larger rivals Diageo (DGE.L) or Pernod is unlikely.
Beam has been viewed as an attractive takeover target since becoming a stand-alone public spirits company in October 2011. Analysts and bankers long speculated that its range of bourbons would fit nicely into Diageo's portfolio, which has many Scotch whiskies but only one bourbon.
Suntory and Beam already have a business relationship under which Suntory distributes Beam products in Japan and Beam distributes Suntory's products in Singapore and other Asian markets.
Suntory intends to fund the acquisition through a combination of cash on hand and fully committed financing from The Bank of Tokyo-Mitsubishi UFJ.
Mitsubishi UFJ Morgan Stanley is acting as financial advisor to Suntory and Cleary Gottlieb Steen & Hamilton LLP is acting as legal advisor. Centerview Partners and Credit Suisse are serving as financial advisors to Beam and Sidley Austin LLP is serving as legal advisor.
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