Suntory Holdings Ltd., the closely held Japanese whiskey and beer maker, said it will focus on repaying debts from the $16 billion buyout of Beam Inc. before seeking further acquisitions.
The Osaka-based company plans to refinance part of its 800 billion yen ($7.85 billion) of bridge loans with 300 billion yen of subordinated loans, Chairman and President Nobutada Saji said at a briefing in Tokyo yesterday.
The remaining 500 billion yen may be refinanced by borrowings from megabanks in Japan and issuance of corporate bonds domestically and overseas, he said.
Suntory, which completed its acquisition of Beam two weeks ago, is betting that the US bourbon maker will help it expand beyond its home market in Japan. Moody’s Investors Service cut Suntory’s credit rating to Baa2 from A3 on May 1, citing the company’s “high” financial leverage.
“I still think the acquisition of Beam is expensive, even now, but it’s worth it from a long-term perspective,” Saji told reporters in Tokyo. “We would first focus on repaying debt for the Beam deal, before seeking other merger and acquisition targets.”
The deal, which the company said would make it the world’s third-largest distiller of premium spirits, represents the biggest acquisition by a Japanese company since SoftBank Corp. bought control of Sprint Corp. for $21.6 billion in a deal announced in 2012.
Suntory, which received a quarter of its 2013 revenue from overseas, has acquired sales channels in countries where it had a relatively small presence, such as Brazil, India, Russia and the US The Japanese beverage maker will also benefit from better margins at Beam, where operating costs consumed 74% of sales in 2013, compared with 93.8% at Suntory, according to data compiled by Bloomberg.
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Saji said yesterday merger and acquisition is “one option” to improve Suntory’s sales growth, but the company currently has no specific acquisition targets. The company is targeting 4 trillion yen of sales by 2020, including 1 trillion yen from spirits operations, he said.
The company expects sales this year to reach 2.5 trillion yen with 38% coming from the overseas market, Vice President Shigehiro Aoyama said.
Suntory, which makes Yamazaki whiskey and Premium Malt’s beer, began in 1899 as a wine store in Osaka in western Japan. Nobutada Saji, 68, is a grandson of founder Shinjiro Torii and has held the president’s job since 2001.
“It means a lot to me to become a global player in the liquor business in which my grandfather founded the company,” Saji told reporters in Osaka in February. “It’s not expensive to pay 1.7 trillion yen to buy a future dream,” he said of the Beam deal.
Bloomberg
