Ackman gets something to cheer about with Suntory-Beam deal

Mon Jan 13, 2014 3:16pm EST
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By Svea Herbst-Bayliss

BOSTON Jan 13 (Reuters) - Like a fine bourbon, a good bet sometimes needs to age.

Hedge fund billionaire William Ackman saw his 3-1/2 year old investment in Fortune Brands pay off big on Monday when Japanese whiskey producer Suntory said it would pay $13.6 billion cash for Beam, the liquor unit spun out of Fortune in 2011.

The deal, if it goes through, will give Ackman and his investors something to drink to in early 2014, after his 2013 was overshadowed by a $500 million loss on J.C. Penney and mounting losses on his short against Herbalife.

But it also shows Ackman's long-term investment savvy by proving right his years-old theory about Fortune Brands: the conglomerate owner of Titleist golf balls, Jim Beam and Moen faucets was far more valuable to investors broken up than unified.

Fortune Brands was worth about $7 billion in 2010 before it was split up under pressure from Ackman - less than half the agreed selling price for Beam alone.

"What (Ackman) needs is a winner to help erase the memories of J.C. Penney," said one investor in Ackman's fund who is not permitted to discuss his investments publicly. "He has been able to come back before with winners like General Growth Properties and Canadian Pacific," referring to other bets that have proven winners over the course of years.

With news of the proposed Suntory deal driving up Beam's stock price 24 percent on Monday, Ackman's Pershing Square Capital Management stands to earn $370 million on the investment in one day. Pershing Square is Beam's biggest owner with a stake of 12.8 percent, and Beam makes up roughly 15 percent of Pershing Square's total portfolio.