Suntory Holdings Ltd., the closely held Japanese whiskey and beer maker, plans to borrow as much as $12 billion to finance the purchase of Beam Inc. (BEAM), two people familiar with the matter said.
Mitsubishi UFJ Financial Group Inc. (8306)’s lending unit has agreed to provide a bridge loan of $10 billion to $12 billion for the acquisition, the people said yesterday, asking not to be identified because the information is private.
Suntory said Jan. 13 it agreed to buy Beam, the maker of Jim Beam and Canadian Club liquor, for $16 billion including debt. Moody’s Investors Service yesterday put the Tokyo-based company’s A3 credit rating on review for a downgrade, saying the deal is expected to add more than $10 billion to Suntory’s debt.
Spokesmen for Suntory and Mitsubishi UFJ declined to comment on details of the loan.
Mitsuyoshi Takahashi, a senior credit analyst at Mizuho Securities Co. in Tokyo, said in a note yesterday that Suntory’s credit rating may be cut by two levels because of the Beam acquisition. The deal will “greatly worsen” its financial metrics, Takahashi said.
Suntory, the maker of Yamazaki whiskey and Premium Malt’s beer, is seeking to boost overseas growth as the population in its home country shrinks and ages. The company in 2012 had explored an offer for Beam alongside Diageo Plc. (DGE)
Nobutada Saji, a grandson of Suntory founder Shinjiro Torii, has led the family-controlled business to expand outside Japan since he took over as president in 2001. In 2009, it spent a combined 376 billion yen ($3.64 billion) to acquire French soda maker Orangina Schweppes and New Zealand’s Frucor Beverages Group Ltd.
Beam, whose largest shareholder is activist investor Bill Ackman’s hedge fund, in 2012 got 59 percent of its revenue from North America and 21 percent from Europe, the Middle East and Africa. Almost 80 percent of Suntory’s revenue came from Japan in 2011, according to the most recent available data compiled by Bloomberg.
The offer from Suntory values Beam at about 20.5 times earnings before interest, taxes, depreciation and amortization of $775 million in the year through September, data compiled by Bloomberg show. That compares with a median of 12 times historic Ebitda paid in 16 purchases of wine and spirits assets over the past five years, the data show.
The Beam takeover, 2014’s biggest, would be the largest overseas acquisition by a Japanese company since SoftBank Corp. (9984) acquired Sprint Corp. for $21.6 billion in a deal announced in 2012. Beam was formed with the breakup of Fortune Brands Inc. in 2011. In 2012, Beam acquired the Pinnacle Vodka and Calico Jack rum brands from White Rock Distilleries Inc. for $605 million.
Fueled by a strong currency, Japanese companies embarked on an overseas buying spree that peaked with $113.5 billion worth of deals announced in 2012, data compiled by Bloomberg show. With the yen weakening, the value of overseas deals announced last year dropped to about $46 billion, the data show.
Mitsubishi UFJ Morgan Stanley advised Suntory, while Centerview Partners and Credit Suisse worked with Beam on the deal, according to the joint statement Jan. 13.