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Beam Tingles Taste Buds With Pinnacle Acquisition


Let the spirit move you: The $605 million deal is set to push Beam to the forefront of the vodka class.


Several spirit brands have recently delved far into the dessert category of vodka flavors, ranging from Cotton Candy to Whipped Key Lime. In an effort to leap in front of the competition, Beam (BEAM) has just acquired perhaps the most innovative of these delectable distributors: Pinnacle Vodka.

The announcement that Beam would be gaining the fastest-growing premium vodka brand, along with Calico Jack rum brands, came earlier this morning. The $605 million deal is set to push Beam to the forefront of the vodka class, a group it has been trying to break into as of late. By taking on Pinnacle Vodka, currently the fourth largest imported brand in the US, Beam is positioning itself to experience exciting growth following the acquisition.

"Pinnacle is an excellent strategic fit for Beam, giving us a strong and exciting growth platform in the sweet-spot of the attractive vodka category," said Matt Shattock, president and chief executive officer of Beam. "With the synergy-driven addition of Pinnacle, which will become one of our largest Power Brands, Beam will further enhance its ability to maximize value for shareholders."

Privately-held White Rock Distilleries has spent years building up the Pinnacle brand name, and through its line of specialty desert vodkas and other funky flavors, it has become a massive success. The acquisition of the 30 flavor brand will not only double Beam's vodka presence on liquor shelves across America, but is expected to see $0.05-$0.10 accretion in 2013 from the deal, according to Goldman Sachs.

"Beam stated it expects the deal to be 'significantly' accretive at $0.05-$0.10 in 2013 with increasing accretion in 2014 and beyond due to synergies of about 20% of net sales on a run-rate basis. This compares to an average synergy of 7-8% of target sales for historical Consumer Staples deals. Beam's comment also implies that Pinnacle currently commands EBITDA margin in the high teens, which could expand as Beam leverages its distribution and supply chain scale," the research firm said this morning.

Beam's arguably most present competition, Constellation Brands (STZ), will be doing its best to not let the increased leverage affect its confidence heading into fiscal 2013. In its April 5 earnings call, the spirits distributor was pleased with record free cash flow results and improved consolidated margin structure.

Just as Beam is getting ready to buy a heavy hitter, Constellation Brands did the same with the purchase of Ruffino, a premium Italian wine brand. This acquisition, coupled with Constellation's Svedka vodka traveling down the multiple-flavor path as well, made fiscal 2012 the highest level of brand building the company had seen in recent history. With new campaigns and products on the horizon, Constellation Brands impressed analysts and left them with increased confidence. That was, until Beam one-upped them with today's announcement.

As chefs have strived to please the palates of picky eaters everywhere, so have the mixologists at liquor and wine companies as of late. Whipping up treats of liquid delight has left analysts and consumers hankering for more, and with these latest acquisitions, the sale of booze does not appear to be plummeting any time soon.

Beam is currently trading at $55.78, up +8.88% YTD, while Constellation Brands is currently trading at $21.17, +2.42% YTD.

Editor's Note: This content was originally published on by Katey Stapleton.

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