Beam… Buyout or Value? (BEAM, DEO)

Beam Inc. (NYSE: BEAM) is trading higher after an article in the Daily Mail indicated the chance of a potential “imminent mega-bid” for Beam.  Now that this is a pure-play, it may make more sense, but how much sense it makes would have to be based upon price.  The rumored buyer is Diageo plc (NYSE: DEO) and the rumored price mentioned was $90 per share.  That price does not seem to make much sense with the stock at $55.99 (with a market value already of $8.8 billion) and with a 52-week range of $42.30 to $65.48.

Gabelli & Co. noted on this one: “We expect BEAM to do $35M in 2012 EBITDA growing to $785M in 2013. We expect EPS of $2.40 growing to $2.70. We believe there could be more upside to the numbers if you see pricing come back next year.”

Another thing to consider is that Gabelli has only a $65.00 private market value on Beam based upon 15-times expected 2013 earnings.  Even after seeing some $400 million in synergies, there is quite a difference between $65.00 and $90.00.

JON C. OGG