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Beam Agrees to Dispose Few Brands

Zacks Equity Research

Premium spirits manufacturer and seller, Beam Inc. (BEAM), has agreed to sell some of its economy brands and related inventory to Luxco for about $65 million. The company’s decision to divest its economy vodka and Canadian whisky brands is expected to simplify its portfolio as well as enhance its focus on strengthening its most profitable segments – Power Brands and Rising Stars.

The brands to be sold under the deal are Wolfschmidt vodka, Calvert (Lord Calvert Canadian, Calvert Extra, and gin), Bellows (blended whiskey, Bourbon, gin, rum, Scotch and vodka), Dark Eyes vodka, Canada House Canadian, and Tempo Triple Sec, which are a part of Beam’s Value Creators segment. These brands contributed about $30 million to the company’s 2012 revenues, with total volumes sold reaching nearly 1.8 million cases.

As part of the deal, Beam has agreed to continue producing and packing the disposed brands till Jan 2014. However, the company expects to complete the sale by the end of Jan 2013, subject to customary closing conditions. Moreover, the sale of these brands is expected to be neutral to Beam’s EPS in 2013.

Luxco expects the acquisition to be accretive to its existing portfolio of brands. Going forward, Luxco plans to further strengthen the scope of its brands by expanding and increasing its distribution.
Based in Deerfield, Illinois, Beam produces and sells branded distilled spirits products worldwide. Beam segregates its brands into four segments including Power Brands, Rising Stars, Local Jewels and Value Creators. The company sells its spirits products primarily through direct sales forces to distributors, as well as through joint ventures, third-party distributors, and global or regional duty free customers.

Beam currently has a Zacks Rank #4 (Sell). Not all beverage companies are performing as poorly as Beam. Other wineries and distillers that have a favorable Zacks Rank and are performing well include Boston Beer Co. Inc. (SAM), Compania Cervecerias Unidas S.A. (CCU), which carry a Zacks Rank #1 (Strong Buy) and Brown-Forman Corporation (BF.B), which carries a Zacks Rank #2 (Buy).

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