Deerfield, Illinois, March 31 - Following the Kingdom of Sweden's decision to sell V&S Group and its ABSOLUT vodka brand to Pernod Ricard, Fortune Brands, Inc. today said that it maintained its disciplined approach to acquisitions in the V&S auction process and announced that it intends to initiate a high-return share repurchase program.
"While we had hoped to purchase ABSOLUT at the right price, we didn’t hesitate to put our shareholders’ interests first," said Bruce Carbonari, president & chief executive officer of Fortune Brands. "We took a disciplined approach that carefully evaluated numerous factors, including growth and returns prospects, the current state of currency and capital markets, and attractive alternatives for the use of our financial resources. We didn’t see the appropriate return for our shareholders at the announced price, so we preserved our financial flexibility to create significant value in other ways."
"We have excellent opportunities ahead of us, and we look forward to putting our financial flexibility to work to create value for our shareholders," Carbonari continued. "Our first priority has always been driving organic growth in attractive consumer categories, and we’ll continue to build our leading brands and to grow in new and adjacent markets. We’ll also consider our other opportunities to drive shareholder value, including through share repurchases, evaluating high-return add-on acquisitions across our businesses, and paying attractive dividends. We believe in being strong stewards of capital, and we will continue to allocate our capital with a focus on growth and value creation."
Creating Value with Share Repurchases and Full Ownership of Spirits Unit
The company also announced that it will soon commence a substantial share repurchase program. "At our current share price, we believe we can create excellent value by repurchasing shares," Carbonari said. The company has today put in place an authorization to repurchase up to 15 million shares of Common Stock.
The company also announced that it will initiate the repurchase of the 10% equity stake in its Beam Global spirits business currently held by V&S. "This will enable us to capitalize fully on the financial performance of our highest profit business," Carbonari added.
Protections for Fortune Brands in Spirits Distribution
"The operational consequences of the privatization of V&S are very manageable, starting with significant protections in our spirits distribution joint ventures," Carbonari continued.
The company announced that its Beam Global spirits business plans to continue United States distribution of ABSOLUT vodka via the Future Brands joint venture into 2012. Beam Global holds a majority stake in the Future Brands joint venture. ABSOLUT also remains part of the Maxxium international distribution joint venture. The Maxxium agreements provide certain protections to the partners that help ensure an orderly transition in the event of a change in control of a partner.
"Due to these protections, we expect no adverse EPS impact to Fortune Brands in the near term. These protections give our spirits business plenty of time to manage any future changes to its distribution alliances," said Carbonari.
Company Confident in Growth Prospects for Spirits Business
"Our Beam Global spirits business has a broad portfolio of leading premium brands and a commitment to building brands and driving profitable growth," Carbonari added. "We remain confident in our spirits business’s growth prospects and our ability to compete very effectively in the spirits industry." Beam Global Spirits & Wine is the world’s fourth largest premium spirits business.
"Above all, we are builders of leading consumer brands and consumer brand businesses in attractive high-return markets," Carbonari added. "We are optimistic about what we can accomplish by investing in our brands, outperforming our markets, and leveraging our breadth and balance to deliver superior growth and returns."