Pernod, Jack Daniel’s Maker Brown-Forman Are in Merger Talks

Article content

(Bloomberg) — Pernod Ricard SA and Brown-Forman Corp., the owner of Jack Daniel’s whiskey, are discussing a merger as the alcoholic drink companies look at ways to consolidate amid an industry downturn.

Article content

The French beverages company and Louisville, Kentucky-based Brown-Forman said in separate but similar statements that they were in talks to combine, confirming an earlier report by Bloomberg News. 

Article content

Article content

“If agreed and subject to customary approvals, this partnership would be akin to a merger of equals, drawing from the talent and expertise of both companies, and creating value for shareholders of both companies,” Pernod said in its statement. Brown-Forman used similar wording in its release.

Article content

Article content

Pernod added that it doesn’t intend to further communicate until an agreement is reached or discussions are terminated.

Article content

Article content

The transaction being contemplated has a significant stock component, said people familiar with the matter who asked not to be identified discussing private information. The family owners of both companies will likely both roll large stakes into the new company, with a deal still a few weeks away, the people said.

Article content

Representatives for Pernod and Brown-Forman declined to comment further on the structure and timing of an agreement.

Article content

While Brown-Forman’s owners haven’t been eager to sell the company, Pernod’s family ownership could help ease the way for a deal, JPMorgan Chase & Co. analysts said in a report Thursday. “We would assume that any deal would be stock-based, which would allow the Brown family to maintain a significant ownership stake and share in potential longer-term upside,” the analysts wrote. 

Article content

Class B shares of Brown-Forman rose as much as 21% on Thursday — an intraday record – before closing up 9.6% to $25.74 in New York trading, giving the company a market value of about $11.8 billion. Pernod closed down 5.7% in Paris, for a market capitalization of €15.1 billion ($17.4 billion).

Article content

Article content

Brown-Forman, whose other brands include Fords Gin and Herradura tequila, has been battling soft demand for premium liquors in the US. Pernod Ricard is one of Europe’s largest alcoholic drinks companies, with a portfolio that includes Absolut vodka, Havana Club rum and Jameson whiskey. 

Article content

Pernod and Brown-Forman have each been looking at ways to strengthen their businesses at a time when consumers are drinking less and switching to less expensive liquors. Deliberations are ongoing and there’s no certainty they will result in a deal, the people said. 

Article content

Paris-based Pernod has in recent years been building exposure to spirits like bourbon and tequila through acquisitions. In 2022, it agreed to take a majority holding in Código 1530 Tequila — a brand co-founded by the US country music star George Strait. The following year, Pernod agreed to buy into flavored whiskey maker Skrewball.

Article content

The acquisition appears opportunistic given the difficult trading conditions for spirits companies, but suggests Pernod management believes the category will return to growth soon, wrote Duncan Fox, senior consumer products analyst for Bloomberg Intelligence. Any transaction would likely be via shares given Pernod’s stretched balance sheet at 3.9x net debt-to-Ebitda at the half-year.