Beam Inc. ( BEAM ) is at present in a quagmire regarding its decision to be taken over by Suntory Holdings Ltd. In the past few days, certain law firms as well as shareholders have opposed the boards' decision citing that the transaction undervalued the world's fourth largest spirit company and management had failed to execute its duties in an appropriate manner.
As per Bloomberg , one of the shareholders, Todd Miller has filed a complaint against Beam's management for breaching the fiduciary duties to shareholders in the state court of Chicago, Illinois. In his complaint, Miller stated that the deal amount undervalued Beam in a situation where Suntory will enjoy a substantial synergy.
In the filed complaint, Chief Executive Officer Matthew Shattock, Chairman A.D. David Mackay and six directors are named defendants. The plaintiff seeks a court order to block the transaction and wants Beam's management to adopt proper merger procedures.
Apart from this, some of the securities law firms such as The Law Offices of Vincent Wong, Levi & Korsinsky LLP, and Deans & Lyons have begun investigating to check whether management had carried out its duties before entering the agreement with the Japanese brewer.
On Jan 13, Beam had signed a deal to be acquired by Suntory in an all-cash transaction. Suntory Holdings offered $83.50 per share to acquire all outstanding shares of the Deerfield, Illinois-based spirit maker. The total buyout amount, including Beam's net debt, is approximately $16 billion.
The Japanese beverage company's offer price is 25% higher than Beam's closing price of $66.97 on Jan 10. Moreover, the valuation comes at a multiple of 20 times of Beam's twelve-month earnings before interest, taxes, depreciation and amortization (EBITDA) ended on Sep 30 last year and a premium of 24% to the last three months volume-weighted average share price.
Beam's management, which now awaits approval from shareholders and regulatory authorities, expects to close the deal by the end of second-quarter 2014. After the deal is sealed, Suntory Holdings will become the world's third largest whiskey company after Diageo plc ( DEO ) and Pernod-Ricard SA and will reap annual revenue of about $4.3 billion.
The alcoholic beverage industry is witnessing major consolidation. Yesterday, as an endeavor to strengthen its position in the Asia-Pacific region, Anheuser-Busch InBev SA/NV ( BUD ), also known as AB InBev, entered into an agreement with KKR and Affinity Equity Partners to reacquire its South Korean asset - Oriental Brewery - for a sum of $5.8 billion. The deal marks the second big alcohol transaction of 2014 after Beam - Suntory transaction.
Currently, Beam carries a Zacks Rank #4 (Sell). A better-ranked brewer is Constellation Brands Inc. ( STZ ) with a Zacks Rank #1 (Strong Buy).
