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Buyers may acquire a taste for Beam

by Eric Vermilya  |  Published December 19, 2011 at 4:24 PM
2Buyers-may-acquire-a-taste-for-Beam227.jpgDuring this festive season, it's only fitting to report whiskey is changing hands in suitably prodigious quantities. On Friday, Dec. 16, Beam Inc., based in Deerfield, Ill., announced it would acquire Dublin's family-held Cooley Distillery for $95 million. The deal comes as industry watchers speculate that Beam itself may be on someone's Christmas list, following its spinoff from Fortune Brands in October.

Cooley is Ireland's other distiller, the one that isn't Jameson -- owned by Pernod Ricard SA -- or Bushmills -- owned by Diageo plc. With two of the world's biggest spirits proprietors behind them, Jameson and Bushmills dominate the Irish whiskey market akin to the way Budweiser and Miller dominate American beer. But as a few beer drinkers may admit, amount quaffed may not necessarily equate to quality. Some whiskey aficionados swear Cooley products Kilbeggan, Tyrconnell, Greencore and especially Connemara are superior drams.

Cooley produces about 250,000 cases a year, only about 5% of the total Irish whiskey sales. That market is growing at a double-digit clip thanks in part to Jameson's high-profile marketing push in the United States and elsewhere.

Beam's ownership of Cooley can certainly add to the competitive landscape. What this acquisition means for Beam's own future is another matter.

Fortune Brands, which sold its golf holdings earlier this year, divided itself up between alcohol and home security, which made for strange bedfellows to begin with. Fortune investors lobbied hard for a sale of the spirits part of the business, and the standalone nature of newly christened Beam certainly helps. Diageo, along with privately held Bacardi Ltd., is seen as leading potential suitors.

Beam owns a shelf full of name-brand booze, led by Jim Beam, Maker's Mark and Knob Creek bourbon. But its trailing 12-month revenue of $6.84 billion is less than half that of Diageo. Tellingly, Beam's market cap is less than one-sixth its much bulkier competitor.

Beam's acquisition of Cooley, however, could complicate matters for Diageo. They might have a hard time convincing notoriously picky European Union competition regulators, who might sniff disapprovingly at two companies controlling the entire Irish market. Already, there's talk that if Diageo were to acquire Beam, it would have to jettison some of Beam's best-known brands, including Courvoisier cognac and Sauza tequila, to satisfy antitrust concerns.

Such a selloff would leave Beam as essentially a bourbon maker. That might not be enough incentive to shake Diageo from any post-holiday stupor.
Tags: Beam Inc. | Budweiser | Bushmills | Connemara | Cooley Distillery | Courvoisier | Diageo plc | European Union | Fortune Brands | Greencore | Jameson | Jim Beam | Kilbeggan | Knob Creek | Maker's Mark | Miller | Pernod Ricard SA | Sauza | Tyrconnell

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