<

Pershing Square's positions in 4Q 2013

Part 6
Pershing Square's positions in 4Q 2013 (Part 6 of 7)

Pershing Square reduces its stake in Beam following takeover deal

William Ackman’s Pershing Square trimmed its holding in alcoholic-beverage maker Beam Inc. (BEAM). A 13D filing on February 18 revealed that the hedge fund had sold 1.85 million shares of Beam for a value of $154.06 million. The filing stated that the fund now owns 11,668,545 shares in Beam, representing a 7.1% stake. The fund had earlier in January reduced its stake by 7.3 million shares to own 13.5 million shares, or 8.3%.

BEAMEnlarge GraphBeam shares were up 25% after it received a takeover offer from Japanese drinks maker Suntory on January 13.

Under the $16 billion deal with Suntory, Beam’s shareholders will receive $83.50 per share in cash. The transaction consideration represents a 25% premium to Beam’s closing price of $66.97 on January 10, 2014; a 24% premium to the volume-weighted average share price over the last three months; and a multiple of more than 20 times Beam’s EBITDA for the 12-month period ended September 30, 2013. The transaction is expected to create a stronger global player in premium spirits with annual net sales of spirits products exceeding $4.3 billion.

Ackman had been instrumental in the creation of Beam by pushing for the breakup of conglomerate Fortune Brands (FBHS), in which Pershing Square built up a majority stake in 2010. Pressurized by Ackman, Fortune sold its Titleist golf business to a group led by Fila Korea and a South Korean PE firm for about $1.2 billion in 2010. The home products division including Moen faucets and Master Lock was later spun off to shareholders. Fortune’s liquor arm Beam, which has brands including Jim Beam bourbon, Laphroaig, and Courvoisier cognac, saw shares jump 24% after the breakup in 2011.

BEAMHEnlarge Graph

For 4Q 2013, Beam reported a 4% increase in net sales to $2.55 billion. Comparable fourth quarter sales growth benefited from strong demand for the company’s premium whiskey and tequila brands, successful new-product innovations, and an approximate one point benefit from a return to growth in India. Comparable sales in the quarter reflected market outperformance in North America and Europe, which more than offset continued softness in the Australia market.

The Realist Discussions