5. Fortune Brands does the splits
When Fortune Brands announced that it was pressing ahead with plans to let its drinks division – Beam Global Spirits and Wine – go it alone with its own stock market listing from October, speculation over the future of the company’s portfolio was immediately rife.
The move was announced at the turn of the year after activist investor William Ackman had forced Fortune into a corner because of its regular underperformance. Following the announcement of the split, Fortune’s shares had put on almost 25% by mid summer, but slumped back to their pre-Christmas level as world markets crashed.
Now known simply as Beam Inc, Beam’s brands include Courvoisier Cognac, Jim Beam bourbon, Maker’s Mark bourbon, Canadian Club whiskey and Sauza Tequila.
Analysts anticipated that the separate listing for Beam would lead to an auction of its various brands among the drinks industry’s biggest players.
“Rival groups will eye its plum brands to bolster their own portfolios, but the various competition authorities in Washington and Brussels would not let the whole of Beam fall into one single pair of hands,” we wrote back in August.
“Diageo, the world’s leading spirit company, would be keen on Jim Beam, but it is no secret that Paul Walsh, Diageo’s chief executive, wants the 66% he does not own of Moët Hennessy, not least because, along with Scotch, Cognac is the growth engine in emerging markets. Can he afford both, even despite the company generating free cash flow of £2 billion a year?
“Diageo would have to find buyers for Beam’s Courvoisier, which is a direct competitor of market leader Hennessy, while Sauza is the number two Tequila to Diageo’s José Cuervo. Diageo would also probably be barred from controlling Cruzan rum, which competes with Captain Morgan.”
Likewise, Pernod Ricard has also “run the numbers” over Beam, but like Diageo would likely face obstacles in bidding for the whole portfolio.
For its part, Pernod Ricard has promised shareholders that its focus until next summer is to further reduce debt following the 2007 takeover of Vin & Sprit, which brought Absolut vodka into its portfolio. But both Pierre Pringuet and Gilles Bogaert, respectively CEO and finance director, have been very careful in their choice of words of late not to close the door completely on acquisitions before mid 2012.
Pringuet, for instance, has spoken of possibly making “strategic” but not “tactical” purchases. His prime target would be to fill the major hole in Pernod Ricard’s portfolio with Sauza Tequila, which he sought to capture in 2005 only to be beaten by Fortune Brands.
Both Rémy Cointreau and Davide Campari stated with their results in the summer that they were looking to bolster their portfolios and VJ Mallya, head of India’s United Spirits, let it be known that he would be interested to look at any Beam brands that might come his way – an obvious target is Teacher’s.
Speculation will certainly continue well into 2012. Indeed, there is no promise of anything materialising from the gossip, but at least it keeps us all guessing.
