Fortune Brands Plans to Split Up Jim Beam, Titleist and Moen
Fortune Brands Plans to Split Up Jim Beam, Titleist and Moen
Fortune Brands Inc., the maker of Jim Beam bourbon, Moen faucets and Titleist golf balls, plans to split the company into as many as three separate businesses under a proposal approved in principle Tuesday by its board of directors, according to people familiar with the matter.
The company intends to spin off its home and security unit to shareholders in a tax-free transaction, and to either sell or spin off its golf division, these people said. Separately, Fortune Brands would remain an independent, publicly traded company focused on liquor brands that include Maker's Mark bourbon and Sauza tequila, the people said.
The Deerfield, Ill., company, which has a market capitalization of $9.3 billion, is expected to announce the plan as soon as Wednesday.
The move comes two months after activist shareholder William Ackman's hedge fund disclosed an 11% stake in the conglomerate. However, Fortune Brands's management and board were already deep "into the homestretch" of pursuing a breakup of the company when Mr. Ackman's Pershing Square Capital Management disclosed the investment, said one person familiar with the matter.
In a statement emailed Tuesday evening, Fortune Brands said its board and management "continuously review the company's strategy, including corporate structure," without elaborating. Fortune Brands said the board and management "will continue to act with the interests of all shareholders in mind."
"That's phenomenal news," Mr. Ackman said of Fortune Brands's plans in an interview Tuesday evening. "We think the long-term value of each of the three businesses will be materially higher if they are separate. ... That is going to create a lot more shareholder value over the long-term."
The company has been analyzing the possibility of splitting up the company for the past four years as part of a strategic review, according to one person familiar with the matter. The company determined that "the businesses are ideally positioned" now to stand on their own "to really drive shareholder value," this person said.
Fortune Brands reached the decision now to go forward with a breakup because of the improving economy, a recent uptick in demand for distilled spirits and deals the company recently secured with major retailers to sell its home products.
The company plans to develop detailed plans for the breakup over the next several months and present them for final approval from the board.
The Wall Street Journal reported in November that the company's management was open to the idea of separating the businesses and that Fortune Brands's interaction with Mr. Ackman had been "constructive" rather than confrontational.
The company met with Mr. Ackman, known for seeking changes in companies whose shares he feels are underperforming, on Nov. 4.
Fortune Brands shares have risen since Mr. Ackman disclosed his interest, which made his fund the company's biggest shareholder.
The golf unit, known as Acushnet Co., makes FootJoy shoes and gloves as well as Titleist golf balls, and is the world's largest golf company as measured by net profit. The division, which gets about 45% of its revenue from outside the U.S. and has grown rapidly in South Korea, is expected to attract interest from golf and sporting-goods companies in Asia as well as private-equity firms, the people familiar with the matter said. Fortune Brands hasn't decided yet whether to spin the unit off or sell it outright.
In its home division, Fortune Brands closed about 25 factories and laid off roughly 40% of its work force amid the U.S. recession, when demand for home-improvement projects and new home sales plummeted. The division, which includes Simonton windows and Aristokraft cabinets, this year resumed growth in operating profit and sales and began hiring hundreds of employees.
The spirits unit is the company's largest by operating income and posted $2.5 billion in 2009 annual sales. Revenue was up 7% in this year's first nine months.
Fortune Brands is a 25-year-old company, though many of its operations were founded decades ago. The company was known as American Brands until 1997, when it changed its name after selling several businesses, including a tobacco unit.
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