Jack Daniel’s owner eyeing shake-up? Decades-old distiller favours Pernod amid struggling US spirits market – Report
Brown-Forman Corp, owner of Jack Daniel’s whiskey producer, is reportedly keen on a deal with French distiller Pernod Ricard SA, following a rival offer from American rival Sazerac Co., which it follows closely. Bloomberg It was reported, citing a person aware of the development.
With the potential merger, Brown-Forman could have a better route to market Jack Daniel’s in China and India, where demand for whiskey is growing given Pernod’s extensive distribution network, the report said. This will also expand the global reach of both companies.
Sources close to the matter said that the proposed deal would be 80 percent in shares and 20 percent in cash.
News of the controversy comes amid pressure that Brown-Forman, like other distillers, is facing due to a rapid decline in alcohol consumption, especially among young adults.
The U.S. spirits market has been struggling, with off-premise sales averaging flat growth of 1% over the past three years, according to Bloomberg Intelligence. Amid this crash, Brown-Forman has been hit particularly hard, with its shares falling 60% over the past five years.
Why does Brown-Forman Corp favor Pernod?
Sources aware of the discussions also said: Bloomberg Brown-Forman Corp sees Pernod as a better fit because the combined company can diversify across different geographies and types of spirits. Additionally, a deal with Pernod would give the 150-year-old family-controlled distillery behind Jack Daniel’s a larger stake in the business and more clout.
A potential merger between Brown-Forman, which has a market cap of about $13.4 billion, and Pernod, which has a market cap of about $20 billion, could create a leader in American whiskey, strengthen Pernod’s position in tequila and expand the global reach of both companies.
Meanwhile, Sazerac plans to submit a $15 billion all-cash bid for Brown-Forman. New York Times He reported on April 17.
Sazerac, which makes Buffalo Trace bourbon and Southern Comfort liqueur, whose roots date back to the 1630s, is heavily focused on the U.S. market. Its whiskey-centric portfolio closely aligns with Brown-Forman’s offerings.
While the Brown family holds two-thirds of the company’s voting rights, Sazerac’s all-cash offer could appeal to minority shareholders looking to exit the volatile spirits industry. However, the merger would consolidate more than 30% of the U.S. whiskey market, which analysts at Barclays Plc say would likely trigger “expanded scrutiny” by regulators that is not warranted under the Pernod merger Bloomberg.
Is Louisville an important area?
Brown-Forman and Pernod considered retaining Louisville, Kentucky, as a key site for the combined entity as part of ongoing discussions. However, it is unclear whether the city will be the center or just a large center.
While talks are ongoing, people aware of the matter reportedly said there is no guarantee it will result in a sale of Brown-Forman.
