Fortune Brands To Keep Jim Beam, Ditch Everything Else
NEW YORK (AP) — Consumer products maker Fortune Brands Inc. plans to split into three separate companies, keeping its liquor business led by Jim Beam bourbon while shedding the businesses that make Titleist golf balls, Moen faucets and Master Locks.
Fortune Brands said Wednesday it will focus on its spirits business which generates annual revenue of $2.5 billion and also includes brands such as Canadian Club and Maker's Mark.
The home and security business, which also includes MasterBrand cabinets, will be spun off on a tax-free basis to shareholders. The golf business, which also includes FootJoy golf shoes and gloves, will be either spun off or sold.
The announcement comes two months after activist investor William Ackman took an 11 percent stake in the company, becoming its largest shareholder.
Shares rose $2.85, or 5 percent, to $64 in premarket trading.
Fortune Brands, based in Deerfield, Illinois, said it expects to complete separation planning within several months. The separation is subject to conditions including regulatory approvals.
The company said the plan is the result of its ongoing strategic review over the past four years.
"While the breadth and balance of our portfolio have served shareholders very well, we see the potential for even greater value by separating our businesses into focused companies at a time when they have emerged from the economic downturn in such strong positions," Chairman and CEO Bruce Carbonari said in a statement. "We believe now is the right time to move ahead with this tax-efficient approach, and we're confident the course we've outlined today generates greater potential long-term value than all other alternatives."
Morgan Stanley analyst Dara Mohsenian said a split had been expected since Ackman took a stake in the company. She kept her "Equal weight" or "Hold" rating on the stock and said the split-up plans probably won't result in a stock price high enough to justify a "Buy" rating.
In the third quarter ended in September, the company reported its net income fell 17 percent because of one-time charges and the expiration of the homebuyer tax credit. Revenue rose less than 1 percent.
Shares of Fortune Brands closed Tuesday at $61.15. The stock is up nearly 42 percent in the year to date and has rallied 18 percent since early October when Pershing's stake was first reported.
Ackman and his Pershing Square Capital Management has agitated for major changes at retailers he holds stakes in, such as McDonald's Corp., Wendy's International Inc. and Target Corp.
Earlier this week Ackman, who has a 37 percent Stake in Borders Group Inc., made headlines by saying he would finance a Borders bid to acquire its larger rival Barnes & Noble Inc.