February 20, 2014 – Beam Inc. shareholders will vote March 25 on whether to accept Suntory’s $16 billion offer for all outstanding shares of the largest US-based drinks company. Shareholders will receive $83.50 per share in the deal, which has already been approved by directors of both companies. Suntory will pay $13.6 billion in cash and assume Beam’s outstanding debt. Assuming all regulatory approvals are received, the deal will close in April and create the world’s third-largest spirits company.
Beam’s largest shareholder, activist investor William Ackman and his Pershing Square hedge fund, has already started locking in his profits from the deal. Pershing Square’s latest filing with the Securities & Exchange Commission shows the hedge fund has sold 1,850,000 shares of Beam this month for an average price of $83.27 per share, bringing in around $154 million. Ackman’s firm now holds about 7.1% of Beam’s outstanding shares, down from 8.3% on January 31 and approximately 13% when the Suntory deal was announced on January 13. Ackman was largely responsible for pressuring Fortune Brands to break up into three separate companies in 2011, with Beam Inc. becoming a standalone spirits company.
However, one issue Beam had hoped to resolve before the sale will become Suntory’s responsibility. A New York federal judge has rejected Beam’s motion to dismiss a $100 million lawsuit filed last March by Sidney Frank Importing Company. The suit charges Beam broke its contract with Sidney Frank to supply bulk whiskey from Ireland’s Cooley Distillery for use in Sidney Frank’s Michael Collins Irish Whiskey. Beam inherited the contract when it acquired Cooley at the end of 2011, but decided to stop selling bulk whiskey to independent bottlers in order to make more whiskey available for Kilbeggan and the other former Cooley brands included in the sale.
At the time, Beam executives said they would continue to supply whiskey to customers with long-term contracts. Sidney Frank claims it had one of those contracts, but the judge rejected Beam’s claim that there was no contract in place after December 31, 2007. The judge also allowed Sidney Frank’s claim that Beam illegally interfered with its business by telling distributors that the Michael Collins brand would be going away. Beam spokesmen told Law360.com that the company will continue to fight what they called a “baseless lawsuit. In a news release issued February 25, Sidney Frank CEO Lee Einsidler praised the judge’s ruling.
“We are pleased by the Court’s ruling although not surprised, as the facts are known and they will speak loudly for themselves. The fact that the Court ruled completely and entirely in our favor on all three causes of action clearly shows that, given our day in Court, we will establish that our long-term contract with Cooley Distillery was in full force and effect, and that Beam wrongfully terminated the contract by unilaterally cutting off the whiskey supply at the source.”
No trial date has been set.
Editor’s note: The original story was updated with comment from Sidney Frank Importing Company CEO Lee Einsidler.