gs Ltd. will move its headquarters for its alcoholic beverage businesses to the United States after completing its acquisition of Beam Inc., a U.S. spirits manufacturer ranked fourth in the world, according to sources.Sources said Friday that the Suntory group aims to implement international business strategies from the U.S. base to expand sales channels across the globe.
Under the new structure, Beam will become a subsidiary named Beam Suntory, which will be headed by Beam Chief Executive Officer Matt Shattock. Officials from the Suntory group, including Suntory Holdings Executive Vice President Yasunori Aiba, who is also president of Suntory Liquors Ltd., will join the directorial board of the new company.
International business strategies for alcoholic beverages in Japan, including those for whiskey, will be transferred to the headquarters of Beam Suntory in Illinois.
By doing this, the Suntory group aims to increase overseas sales through utilizing Beam’s sales channels.
Beam is the manufacturer of such spirits as the Jim Beam brand of whiskey. Suntory Holdings will purchase the company for $16 billion (about ¥1.6 trillion).
To borrow more than ¥1 trillion as a short-term loan from a bank, the Suntory group has begun to strengthen its financial foothold by issuing about ¥300 billion worth of subordinated bonds through the end of this summer.
The acquisition of Beam is likely to be completed by early May. After that, Suntory Holdings will control the group as a whole from Japan.
Suntory Beverage & Food Ltd., which is listed on the First Section of the Tokyo Stock Exchange, and Suntory Wellness Ltd., which sells health foods, will do business in Japan.
Suntory Liquors Ltd. has been in charge of domestic sales and developing overseas sales routes of whiskey, beer and other alcoholic beverages.
After the acquisition, however, the functions of sales strategies for global markets, including Japan, will be transferred to Beam Suntory to expand overseas sales channels of such brands as Hibiki and Yamazaki whiskeys, and The Premium Malt’s beer. Though the Japan business division for alcoholic beverages will be placed under Beam Suntory, it will continue to oversee development and sales of products for the local market.
Due to the debt incurred by the acquisition of Beam, Suntory Holdings’ capital adequacy ratio, an indicator of business stability, will fall significantly.
Credit-rating agencies such as Moody’s Investors Service are now considering whether to lower Suntory Holdings’ rating. If its rating is lowered, it will be difficult for Suntory Holdings to issue corporate bonds, and the company will find itself with fewer options to procure funds.
To maintain its high credit rating, Suntory Holdings will ask government-affiliated financial institutions and megabanks to buy its subordinated bonds, which can be regarded as part of the company’s own capital. Holders of subordinated bonds have a lower priority to be repaid.
With the plan in mind, Suntory Holdings aims to compile a business growth strategy for catching up with leading foreign rivals.
Worldwide business realignments are taking place in the alcoholic beverage industry. The Suntory group will likely become the third-biggest firm globally, up from the current 10th, as its sales of spirits will top ¥1 trillion after the acquisition.
But the sales figure will still be far behind the ¥3.2 trillion of Diageo PLC of Britain, the global industry leader, and the ¥1.9 trillion of Pernod Ricard of France.
