Moody's has placed the credit rating of Suntory on review for downgrade, following the Japanese beverage maker's move to spend $16bn on acquiring Beam Inc, one of the biggest names in US whiskey.
The ratings agency on Tuesday cautioned that the deal would "result in a significant increase in debt burden, with incremental debt of over $10bn" for Osaka-based Suntory. Moody's currently has Suntory rated at A3, a solid investment grade rating.
The deal, valued at $16bn including debt, underscores Suntory's global ambitions and Asia's growing thirst for premium spirits.
The takeover is the biggest in the drinks industry since French group Pernod Ricard's €5.6bn acquisition in 2008 of Vin & Sprit, the Swedish owner of Absolut vodka.
The deal, which has been unanimously approved by both companies' boards, will close in the second quarter of the year, subject to Beam shareholder approval. The two sides said it would result in "a stronger global player in premium spirits with annual net sales of spirits products exceeding $4.3bn".
Suntory, Japan's biggest soft drinks group by sales, is to pay $83.50 a share - a 25 per cent premium to Beam's closing price on Friday of $66.97. Japanese companies have been encouraged to seek higher returns abroad since the introduction of "Abenomics", the inflation-boosting economic reforms introduced by prime minister Shinzo Abe.
Shares in Beam jumped up to the offer price, rising more than 24 per cent in late Wall Street trading on Monday to $83.42. Privately owned Suntory will fund the deal with its own cash and financing from the Bank of Tokyo-Mitsubishi UFJ
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> Trevor Stirling, an analyst at Bernstein Research, described the price as "punchy" - a multiple of 20 times Beam's earnings before interest, tax, depreciation and amortisation for the year to the end of September 2013.Pernod paid a similar multiple for Absolut - 20.8 times - and was widely regarded to have overpaid, though the acquisition boosted the French company's presence in the US.
Mr Stirling said: "There were significant costs synergies for Pernod in the Vin & Sprit deal, but there are very few cost synergies in this deal because there is little overlap. If there is an upside for Suntory, it will be in revenue synergies."
Vivien Azer, a Citi analyst, said Beam shareholders were getting "an attractive price for their shares, as the over 20 times ebitda multiple stands at the high end of historical precedent transactions".
She added that the chances of another potential buyer emerging for Beam were "low" because both boards had approved the deal and the high termination fee.
Beam, which traces its origins back to 1795, is currently the world's fifth largest spirits group by sales, and its takeover by Suntory will put the combined group in third position, behind the UK's Diageo and Pernod.
It will combine Jim Beam and Maker's Mark bourbons and Teacher's and Laphroaig Scotch whiskies with Suntory's Japanese whiskies - Yamazaki and Hakushu - and Bowmore Scotch. Beam also owns Sauza tequila and Pinnacle vodka, while Suntory has a large portfolio of soft drinks.
Suntory is highly acquisitive. It bought soft drinks brands Lucozade and Ribena for £1.35bn from GlaxoSmithKline last year and acquired France's Orangina Schweppes in 2009.
The Japanese group raised $4bn last year in the initial public offering of its beverages business, which it said was mainly to raise funds for mergers and acquisitions at home and abroad.
Beam was advised by Centerview Partners and Credit Suisse, while Mitsubishi UFJ Morgan Stanley acted for Suntory.
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Why Suntory is buying Beam
The drinks cabinet in Suntory's boardroom is about to get a whole lot bigger, writes Lina Saigol.
Here are four reasons why the Japanese company is buying US drinks group Beam for $16bn, including debt, to become one of the biggest spirits groups in the world.
1. Joining the big leagueThe deal will make Suntory the world's third-largest maker of distilled drinks with strength in Bourbon, Scotch, Canadian, Irish and Japanese whiskies with combined annual sales of spirits of more than $4.3bn to rival Diageo and Pernod Ricard.
2. Suntory less focused on JapanAbout two-thirds of Suntory's sales are in Japan - and are growing at just 3 per cent a year. Buying Beam will help the Japanese group counter the decline in its domestic market, whose shrinking population has intensified competition.
3. Exposure to the US marketThe deal gives Suntory instant access to the US, the world's largest spirits market, and could help it achieve its goal of annual sales of Y2tn ($19bn) by 2020.
4. Raises international profileBest-known outside Japan for its Orangina Schweppes business and its recent acquisition of Ribena and Lucozade, Suntory will now be able to boast some of the world's most sought-after spirits' brands, including Jim Beam, Teacher's and Laphroaig Scotch whiskies as well as Canadian Club whisky and Courvoisier cognac.
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