Analyst: Diageo likely to buy Jim Beam
Diageo Plc is the most probable buyer of most of Fortune Brands Inc.'s Jim Beam spirits business, with Bacardi Ltd. as a bidding partner for the remainder, Liberum Capital analysts said.
“We expect Diageo to buy as much as 70 percent of the Beam Global Spirits business,” paying 3.5 billion pounds ($5.7 billion) to 4 billion pounds, Liberum's Pablo Zuanic and Lisa Hau wrote in a note today. Diageo would need a partner as it couldn't buy Fortune's cognac and tequila businesses because of agreements with other spirits makers, they said.
Diageo, the owner of Smirnoff vodka, has said it aims to make purchases in markets where growth is the fastest. An acquisition of parts of the Jim Beam business would strengthen the London-based company's global franchise and add to earnings from the start, the analysts said.
Fortune Brands plans to split into three separate businesses and focus on distilled spirits after activist investor William Ackman built up a stake, the company said in December. The company's plan includes the continuation of “Fortune Brands as an independent public company focused solely on our Beam Global distilled spirits business,” Clarkson Hine, a spokesman for Fortune Brands, said by e-mail today.
Diageo, which said Feb. 21 it agreed to acquire Mey Icki in a transaction that values Turkey's largest maker of Raki, an aniseed-flavored spirit, at 3.3 billion Turkish lira ($2.1 billion), had 6.95 billion pounds in total current assets as of June 30, according to Bloomberg data.
Bacardi would be the most likely co-bidder with Diageo because of its size compared with other potential buyers, including Davide Campari - Milano SpA, according to the analysts. Another potential bidder, Pernod Ricard SA, may be constrained by its debt ratios, they added.
Fortune, based in Deerfield, said in December it planned to dispose of its home-and-security and golf-products units to focus on distilled spirits. Since then, Liberum said, news reports have indicated Fortune may seek to sell the spirits business.