Fortune Brands Inc. announced plans to spin off or sell its golf and home products units, paving the way for an eventual sale of its most profitable business of alcoholic drinks.
Fortune has come under pressure from activist investor William Ackman, who became the company's top shareholder two months ago after acquiring an 11 percent stake.
Fortune's portfolio includes Jim Beam bourbon, Titleist golf balls and Moen faucets, brands with little strategic overlap, with a combined market capitalization of $9.3 billion.
The company said it had been considering a restructuring over the past four years as it weighed whether the businesses would be worth more on their own. It said now was a good time to do so as all of its businesses have emerged from a U.S. economic downturn in better shape than expected.
"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," said Chief Executive Bruce Carbonari in a statement.
Fortune will spin off its home and security unit to shareholders in a tax-free transaction, and either sell or spin off its golf business, the world's biggest. It will complete these plans in the coming months.
What would remain is Fortune's spirits business, the world's fourth-biggest, with $2.5 billion in annual revenue and brands like Sauza tequila and Maker's Mark bourbon.
Analysts say it would be an attractive takeover target, especially for top player Diageo PLC, which lacks a large bourbon whiskey.
"It's really only a matter of time before it gets acquired," said Morningstar analyst Philip Gorham, adding that the spirits business is likely to get the biggest premium of the three segments, due to its strong profit margins.
Fortune shares were up 55 cents, or 0.9 percent, at $61.70, outpacing a 0.1 percent gain for the wider stock market. They have gained 17.6 percent in the two months since Ackman's investment.
The investment by Ackman, who is known for pushing for changes at companies, renewed speculation about a possible breakup, which has surfaced periodically in the past. Fortune said it "found much strategic common ground" with Ackman.
A tax-free spin-off was expected to be part of the company's approach, since selling brands outright could trigger hefty tax penalties, sources have said.
"It's not as if Bill Ackman came in with this epiphany of an idea of breaking the company up," Gorham said. "I know they'd been thinking about it, I just don't know that they were inclined to do anything about it until Ackman bought his stake," he said.
Ackman was not immediately available for comment.
Deerfield, Illinois-based Fortune is the largest U.S.-based spirits company. Its rivals in spirits include Diageo, Pernod Ricard SA and privately held Bacardi.
© 2017 Thomson/Reuters. All rights reserved.