Suntory Holdings has denied a Wall Street Journal report that Boston Beer was in talks to sell to the global spirits giant.
In a statement shared with Brewbound, a Suntory spokesperson wrote: “There is no fact that we are in any negotiations with Boston Beer.”
On Friday, the Journal, citing “people familiar with the matter,” reported that Boston Beer and Suntory “are in early talks,” with the caveat that a deal may not materialize.
The report set Boston Beer stock (SAM) soaring. SAM stock jumped around $57, to $313.67 by the close of trading on Friday. The stock was still well below the 52-week high of $395.52, but up from the 52-week low of $254.40. As of press time Monday, the stock had cooled to just under $300.
After initially declining a request for comment, Boston Beer issued the following statement after the close of trading on Friday:
“The Boston Beer Company, Inc. is aware of today’s Wall Street Journal article on company sale speculation. We do not comment on rumors. We are fully focused on our business as an independent company and our return to growth.”
Those sentiments were largely echoed in a letter to employees from founder Jim Koch on Friday.
“We will not be commenting beyond our public statement, as we do not respond to rumors because they are exactly that – rumors,” he wrote. “This has happened many times throughout the history of Boston Beer, and I ask that you do not let it distract you from what matters most – making and selling great beer and beyond beer products.
“Instead, let’s fully focus on our business as an independent company and return to growth,” he continued. “Together we are heavy.”
The Journal’s report followed rumblings from analysts earlier this month about a potential sale of the company, although financial services firm Jefferies’ report called a “takeout by a foreign brewer … unlikely.”
Nadine Sarwat, analyst for financial services firm Bernstein, wrote in a Monday note to investors that a Suntory acquisition of Boston Beer is “a good plan on paper, but in practice the devil would be in the details.”
On the pro side of the equation for Suntory, Sarwat noted that Boston Beer already has a “long-term, strategic partnership” with Suntory for beyond beer offerings, and a deal for Boston Beer would bolster its ready-to-drink business in the U.S., which already includes On The Rocks ready-to-serve cocktails, following a 2020 acquisition.
“Acquiring Boston Beer, if it materialised, would give the footprint it seeks to expand more meaningfully into U.S.’ ‘fourth category’ as well as the consumer insights Boston Beer are known for,” Sarwat wrote.
For Boston Beer, the company’s stock has struggled “and visibility into meaningful topline growth remains limited,” Sarwat wrote.
“And while Jim Koch is currently only chairman of Boston Beer, he is still central to the culture of innovation at the company and his succession planning remains a critical question for investors,” she continued. “An acquisition at a solid premium could offer a good solution to all these points.”
On the con side, Sarwat wrote that “cost synergies would be limited to standard back-office cost-cutting.” She added that Twisted Tea is the only Boston Beer brand “in solid growth (albeit decelerating), with all other brands in meaningful decline.”
Additionally, she noted that acquiring Boston Beer for scale and distribution “is not necessarily an advantage in the U.S.,” for Suntory, and the “strong cultural differences” between Boston Beer and Suntory would make maintaining Boston Beer’s culture and innovation “secret sauce” difficult to maintain.
Boston Beer’s market cap is around $3 billion, according to the Journal. A tie up with Suntory would bring together Boston Beer, which generated $2 billion in net sales in 2023, and Suntory’s bev-alc business, which totaled $6.7 billion, Sarwat wrote. Boston Beer would represent about 23% of Suntory’s bev-alc business and about 10% of the company’s net sales following a deal.
Jefferies analyst Kaumil Gajrawala estimated the takeout value of a deal for Boston Beer at $5 billion to $7 billion, “with the high end more likely.”
Gajrawala believes “a deal makes sense,” giving Suntory “a strong position in U.S. premium beer, the ability to operate in the U.S. three-tier system and access to a best-in-class salesforce.”
Should Suntory not emerge as an eventual partner for Boston Beer, other suitors could emerge, with Jefferies suggesting that a deal with Heineken USA “could drive scale,” while a sale to Constellation Brands would merge complementary portfolios.
Jefferies analyst Edward Mundy ran through the pros and cons of a Heineken-Boston Beer, with the conclusion that Wall Street would view the deal as “neutral/negative,” with “scar tissue from Lagunitas” among the cons along with “de-rating risk,” a lack of scale and trouble maintaining the company’s innovation success.
Ultimately, a deal is at the discretion of Koch, who owns all of Boston Beer’s Class B voting shares and whose personal wealth is estimated at $1.4 billion. Koch has famously said he has no plans to retire and his only succession plan is “to not die.”