ERIC W. LIN

The world’s insatiable desire for bourbon was on full display last month when Beam Inc., the parent company of major bourbon brands Jim Beam and Maker’s Mark, announced that it was being acquired by Suntory Holdings Ltd., a premium Japanese spirit and beverage company, for $16 billion including the assumption of debt.  Suntory, which produces Japanese whiskey (e.g., Yamazaki), Scotch whiskey (e.g., Bowmore), and beer (e.g., Malt’s), will pay $83.50 a share for Beam, which besides bourbon also produces Scotch whiskey (e.g., Laphroaig), Irish whiskey (e.g., Connemara), Canadian whiskey (e.g., Canadian Club), and other spirits (e.g., gin, tequila).  The amount per share represents a premium of 25% over Beam’s closing price the business day before the merger announcement.  Driven by American popularity of and increasing worldwide appetite for bourbon, Suntory is aiming to be a global spirits powerhouse transforming its business outside Japan and into large (e.g., U.S.) and emerging (e.g., Brazil, India) economies.  With the acquisition’s closing, which is expected in the second quarter pending regulatory and shareholder approval, the combined companies will be the third largest spirits company in the world behind Diageo and Pernod Ricard.

Although the foreign acquisition of a company known for its quintessentially “American” whiskeys is divisive, the American public should not be worried about Beam’s products or lost American jobs.  First, as documented in the first post, bourbon must be produced exclusively in the U.S. for it to be legally labeled as a bourbon; thus, Beam’s bourbons will remain American-made and not outsourced.  Second, Americans should be aware that foreign companies already own many other well-known bourbon brands, including Four Roses (Japan) and Wild Turkey (Italy).  Third, if these other brands are to serve as examples, foreign investment will raise global sales of Beam’s brands and therefore, create more jobs when the foreign parent builds more infrastructure to meet the growing demand.  Fourth, Suntory and Beam already work together and thus have a familiar relationship distributing each other’s products in different parts of Asia.  Lastly, Beam’s management will remain in place, so Beam will be business as usual in its Illinois headquarters.