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Diageo Plc is poised to be the leader in
a race for Fortune Brands Inc's $8
billion plus Jim Beam spirits business
if the U.S. conglomerate is pressed into
breaking itself up.
The world's biggest spirits group would
be attracted to Fortune's U.S. whiskies
to fill a gap in its spirits portfolio
and tap into the growing popularity of
American whiskies such as Jim Beam and
Jack Daniel's around the world.
Activist shareholder William Ackman took
an 10.9 percent stake in Fortune last
month and press reports last week said
it is now more likely to cooperate with
him on a split of the group between
spirits, golf equipment and home
products.
"If Fortune's spirits become available,
Diageo has to be the leading candidate.
Fortune has one of the two big American
whiskies in Jim Beam and one of the
fastest growing in Maker's Mark," said
one banking source with knowledge of the
situation.
Although an acquisition would bolster
Diageo's small position in U.S.
whiskies, it will create anti-trust
problems around cognac, tequila and
Scottish whisky which may limit Diageo
to acquiring a few brands or require a
bidding partner.
"We believe Diageo may either try to
cherry pick brands in any break-up like
Jim Beam and Maker's Mark, or seek to
acquire the business in combination with
another player and then split the
assets," said analyst Simon Hales at
Evolution Securities.
Fortune, which also owns Courvoisier
cognac and Sauza tequila, is the No.4
spirits group in the world after Diageo,
Pernod Ricard and privately-owned
Bacardi and No.2 in the United States
after Diageo.
Its spirits unit had sales of nearly
$2.5 billion in 2009 under half the
group's turnover of $6.7 billion, but
made over 80 percent of group profits
after its home and security business,
making kitchen cabinets and security
locks, was hit by the downturn. Its
world leading Titleist golf business
makes up less than 5 percent of group
sales.
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