Cruzan parent sold in $16 billion deal
Published: January 14, 2014
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ST. CROIX - An official at Beam, Inc., the parent company of Cruzan Rum, said Monday said that the announced sale of Beam is not expected to impact operations at the local rum distillery.
"It's business as usual," said Clarkson Hine, senior vice-president of corporate communications and public affairs for Beam.
On Monday, Beam and Japan-based Suntory Holdings Limited issued a prepared statement announcing they had come to an agreement for Suntory to acquire Beam in a $16 billion transaction.
Each company's board has approved the transaction, which is expected to close during the second quarter this year, subject to regulatory approvals and Beam stockholders' approval, according to the statement.
Gary Nelthropp, president and chief executive officer at Cruzan VIRIL on Monday afternoon referred questions to Hine.
Hine said that Suntory and Beam are "complementary," and that Suntory utilizes a "highly decentralized model with respect to operations and management."
"Suntory has indicated it wants us to keep doing what we've been doing," Hine said. Beam anticipates operations to continue as they are, he said.
"Our brands will continue to be made the exact same way with all the heritage and authenticity they've always had," Hine said.
Government House spokesman Jean Greaux Jr. said in a written response to a Daily News inquiry that Gov. John deJongh Jr. was aware of reports in the trade and financial press about the potential sale of Beam, but the company had not notified the V.I. government about the details of the sale.
The local government and Cruzan are in a long-term agreement, signed in 2009, in which the territory gives Cruzan tax breaks, molasses subsidies and some of its rum tax cover-over money as an incentive, in return for Cruzan's agreement to stay in the territory for 30 years.
Sales of Virgin Islands-produced rum on the U.S. mainland generate a direct revenue stream for the territory through rum excise tax revenues. For every proof-gallon of Virgin Islands-produced rum exported to the U.S. mainland, the federal government collects $13.50 in excise taxes, of which part is returned - or covered-over - to the territory.
The territory used to get a $10.50 per proof-gallon cover-over all the time, but in 1999, Congress passed legislation that temporarily increased that rebate to $13.25 per proof-gallon. That measure has been renewed several times since then, although it expired on Dec. 31, and at this point, the cover-over is back at the $10.50 level. Congress may vote to extend the higher $13.25 rate retroactively later this year.
According to Monday's statement from Beam and Suntory, Suntory will acquire all outstanding shares of Beam for $83.50 per share in cash or total consideration of approximately $16 billion, including the assumption of Beam's outstanding net debt.
"The transaction will create a stronger global player in premium spirits with annual net sales of spirit products exceeding $4.3 billion," the statement said. The combined portfolio of brands will include Beam's Jim Beam, Maker's Mark and Knob Creek bourbons; Teacher's and Laphroaig Scotch whiskeys; Canadian Club whiskey; Courvoisier cognac; Sauza tequila; and Pinnacle vodka, along with Suntory's Japanese whiskeys Yamazaki, Hakushu, Hibiki and Kakubin; Bowmore Scotch whisky; and Midori liqueur.
The press release did not mention Cruzan rum except in its "about" section for Beam.
The press release said that Beam's president and chief executive officer Matt Shattock and the current Beam management team will continue to lead the business, which will continue to be managed from Beam's headquarters outside Chicago, Ill.
It quoted Nobutada Saji, president and chairman of Suntory's Board of Directors, saying he believes the combination of Beam's portfolio with Suntory's "will create a spirits business with a product portfolio unmatched throughout the world and allow us to achieve further global growth. We are particularly excited about the prospect of working more closely with Beam's excellent management and employees who will play an integral part in the growth of the business."
Greaux said Government House is monitoring the situation.
In Greaux's written response, Gov. deJongh said that he sees the quick and sudden sale of Beam as another example of the importance of his administration's decision years ago to diversify rum production in the territory.
The governor went on to say in that statement that Monday's sale announcement could affect Cruzan Rum but that Diageo - the territory's other rum producer, with whom the government also has an agreement - "remains a solid force in the Virgin Islands economy."
- Contact reporter Joy Blackburn at 714-9145 or email email@example.com.