Brown‑Forman has announced that the company and Pernod Ricard have terminated discussions regarding a potential business combination, as the companies were unable to reach mutually agreeable terms.
Brown‑Forman and Pernod Ricard previously confirmed discussions on March 26 and noted there could be no assurance that any such agreement would be reached.
Brown‑Forman issued the following statement: “We intend to create long-term value for all stakeholders by focusing on our strategic and operational priorities. This includes unlocking future growth by expanding our geographic footprint, continuing to build brands that resonate with consumers, and enhancing operational efficiency.”
Pernod Ricard said it “remains fully focused and confident in its strategy and operating model, supported by strong and committed teams across the Group to deliver sustainable long-term value for all stakeholders”.
Shares in Brown-Forman dropped more than 6% in aftermarket trading.
“While the transaction made strategic sense, allowing Pernod Ricard to strengthen its brand portfolio within the premium segment, particularly in whiskey and the U.S. market, it was financially complex given the valuation differentials between the two companies and Pernod’s leverage ratios,” analysts at AllInvest Securities noted.
Oddo BHF said the talks highlighted that the Ricard family was not prepared to accept equity dilution.
“It is potentially on this latter point that discussions between the two parties diverged,” the research firm suggested, noting that a merger at current market prices would have created an imbalance between the Ricard and Brown families, to the advantage of the latter.
:All of this shows the extent to which Pernod Ricard sought to secure the necessary means, but it is not necessarily a bad thing in the medium term that the deal did not materialize.”
According to a report in The Wall Street Journal, Sazerac has also approached Brown-Forman seeking a deal between the two whiskey giants. A source has also confirmed the approach to Reuters, with an estimated $US15 billion offer on the table.
Sazerac has yet to comment publicly about its interest in Brown-Forman.