Dealmaker of the Week: Cleary's Benet O'Reilly
Benet O'Reilly, 40, an M&A partner in Cleary Gottlieb Steen & Hamilton's New York office.
Osaka-based brewer and distiller Suntory, maker of alcoholic beverages such as Yamazaki whiskey and Premium Malt's beer.
Suntory said on Jan. 13 it had reached an agreement to buy Beam, the maker of bourbon brands such as Jim Beam and Maker's Mark, in a cash deal worth roughly $16 billion, including the assumption of debt.
Under the agreement's terms, Suntory will pay $83.50 in cash for each Beam share—a 25 percent premium over the target's Jan. 10 closing price. Based on equity alone, the transaction is valued at $13.6 billion, but Suntory also will assume more than $2 billion in Beam debt. Pending regulatory approvals, the deal is expected to close in the second quarter of 2014. At that point members of Beam's current management team, including CEO Matt Shattock, will continue to run the business from the company's Deerfield, Ill., headquarters.
In addition to Jim Beam, one of the world's best-selling bourbon brands, and Maker's Mark, Suntory is acquiring other well-known liquor brands such as Canadian Club whiskey, Courvoisier cognac, Hornitos tequila and Laphroaig scotch whisky.
Sidley Austin is representing Beam in connection with the sale to Suntory.
THE BIG PICTURE
The transaction is among the largest-ever outbound acquisitions by a Japanese company—SoftBank's $21.6 billion purchase of a controlling stake in Sprint Nextel in 2012 is the biggest—and the largest acquisition in Suntory's 115-year history. The deal would make Suntory the world's third-largest producer of spirits—behind only U.K.-based Diageo and Paris-based Pernod Ricard—with combined annual net sales that are expected to exceed $4.3 billion. Suntory also views the deal as giving it a chance to expand its presence in the U.S., where the company is perhaps best known for its placement, alongside actor Bill Murray in "Lost in Translation."
For a Japanese company, an entry into the U.S. spirits market is not without challenges. There is, for instance, concern that some bourbon drinkers may balk at the idea of a foreign takeover. But Suntory's pledge to keep current Beam management in place suggests the buyer has no plans to change the production process. And as investment site The Motley Fool points out, Suntory need only look to Tokyo-based Kirin's 2001 purchase of Four Roses for an example of how a foreign company can find success with a U.S. bourbon brand.
Cleary's relationship with longtime client Suntory goes back more than 30 years, beginning with the firm's work on the company's 1980 purchase of Pepsi-Cola bottling franchisee PepCom. Cleary also has worked with Suntory on a number of acquisitions of bottled water companies and helped put together a bottled water delivery joint venture between Suntory Water Group and France's Group Danone in 2003. The firm also represented Suntory in connection with the company's 1990 purchase of Chicago White Sox minor league baseball affiliate the Birmingham Barons.
O'Reilly's own relationship with Suntory extends to his stint as a Cleary summer associate in 1998. He said his first assignment upon joining the firm was a corporate matter involving Suntory's bottled water holdings.
Suntory's interest in a possible deal for Beam reportedly dates to 2011, and the company supposedly considered making a joint bid for the bourbon maker with Diageo last year. O'Reilly said he and the rest of the Cleary team were not called in on the matter until last fall, after Suntory had decided to proceed with a solo bid. The company approached Beam in December to begin negotiations.
Once the two parties came to an agreement on price parameters, O'Reilly said, the roughly month-long negotiations moved quickly to signing. Suntory "has a strong team, both legal and financial, in Japan, all of whom are very well organized and ready to move quickly once Beam made themselves available to be sold," he said.
What resulted was a transformational deal for Cleary's client, with Suntory president Nobutada Saji calling the acquisition a "once in a lifetime gamble" when discussing it earlier this week. O'Reilly added that the transaction makes for a compelling story for Suntory—a family-owned spirits company that runs Japan's oldest distillery and has long desired a piece of the U.S. whiskey market: "Their history is in whiskey and this is kind of the one opportunity they had to buy an American whiskey company."
When it came time for the formal signing of the agreement, O'Reilly said at least one bottle of Maker's Mark made an appearance at the event. And, in keeping with the theme, he added that the Cleary team has plans for a celebratory bourbon tasting in the near future.