Comment - Spirits - Bye-Bye Caution, Hello Buy?
A down-in-the-dumps Richard Woodard is a Richard Woodard best-avoided. But, the spirits giants of this world can bring him out of his stupor. All it would take, it seems, is a little bit of spending.
I’m fed up, and apparently the calendar’s to blame. You see, I started writing this column on Monday (17 January), the day dubbed “Blue Monday” by UK newspapers with nothing better to write about. The day is, we’re told, “statistically the most depressing in the entire year”.
Presumably, this extremely scientific designation is based on thousands of man-hours of painstaking analysis and has something to do with the wearing off of Christmas euphoria, the long dark nights and the size of this month’s credit card bill. That, and the fact that it’s chucking it down with rain.
But, the blame for my furrowed brow and gloomy mien lies fairly and squarely with one group of individuals – the CEOs of multi-national drinks companies. Yes, you. Guys, it’s just so damned boring out there at the moment.
I know there’s been a global economic downturn, I know you’ve been busy trimming your cost base and enforcing efficiency savings (yawn), but come on! Isn’t it about time you got your collective fingers out and started doing what you do best – a little multi-million dollar wheeling and dealing?
Look at last year’s M&A activity (assuming you’ve got a microscope handy). What did we have? Pernod selling off a few bit-part brands to reduce its post-Absolut debt levels? Wow. Beam selling some unpronounceable German bitters and brandy to Henkell? Zzzzzzzz.
The best you could muster was William Grant & Sons forking out the frankly tiddling amount of EUR300m (US$399.4m) to buy the spirits portfolio of C&C International – and, they ended up selling off most of the brands to Campari a few months later. Must. Do. Better.
So I’d like to see a bit more effort this year, please. No more pathetic excuses about how “leveraged” you are and the need to ensure “shareholder value”. Let’s see the 'for sale' signs going up on a few choice spirits properties, and a stampede of buyers, flapping their chequebooks in their greedy little fingers. Let’s make 2011, ahem, The Year of the Deal.
We’ll start small, with Stock Spirits: A strong performer in Central and Eastern Europe, lots of vodka, and an obvious candidate for sale or IPO ever since private equity group Oaktree Capital Management took control on its formation in 2007. Because that’s what private equity groups do and, with the economy more settled, the company looks ripe and ready for plucking.
But it’s probably only a US$1bn or so deal, so let’s move on to more enticing prospects. How about Mey Içki, Turkey’s number one spirits player and particularly robust in gin, vodka and (oh, those headache-filled holiday memories) raki?
Like Stock, it’s private equity-owned - TPG this time - and is rumoured to be yours for a paltry $2.5bn. Sounds a bit steep? Bear in mind the company’s dominant position in the market, the imminent lowering of Turkey’s duty levels in 2012-18 and the country’s relative economic strength (they sensibly had their banking crisis years before it hit Western countries).
Come on, Diageo, let's be having you. Okay, so you’ve had the odd tiff with the Turkish government in the past, but are you going to let a little misunderstanding get in the way of such a tempting deal?
No? Still not tempted? What about Beam Global Spirits & Wine, then? Ah, I thought that might get your attention. The unpicking of Fortune Brands’ corporate structure, with the spin-off of its non-drinks operations, could give Beam Global the kind of financial clout it would need to compete with Diageo, Pernod and Bacardi on future acquisition opportunities.
But, in the shark-infested waters of drinks multi-nationals, the predator can become the hunted in an instant – and there ought to be a disorderly queue of salivating big fish eager to devour brands like Jim Beam, Courvoisier, Maker’s Mark, Laphroaig and Sauza.
Diageo executives would go all giddy at the thought of finally securing strong Bourbon and Cognac brands, while Pernod could pick up some of the jewels it had to reluctantly toss Beam Global’s way in the aftermath of the Allied Domecq takeover in 2005, such as Laphroaig and Maker’s Mark.
Ah, I hear you say, but Pernod’s belly is still full following the EUR5.6bn Absolut deal in 2008 (and how over-priced that looks with post-recession hindsight). I’m not so sure, though – the company has since disposed of roughly EUR1bn in non-core assets and it’s not as if Beam Global’s brands will be available tomorrow.
The time needed for the corporate musical chairs necessary to restructure Fortune could give Pernod the time it needs to get its financial ducks in a row – and, a deal would give the French company the US muscle it currently lacks.
Diageo’s dilemma is somewhat more complex: should it swoop for Courvoisier when Hennessy hovers tantalisingly on the horizon, assuming Bernard Arnault will ever stop flirting and submit to Paul Walsh’s advances?
Perhaps the company’s mind could be made up by news that Brown-Forman is considering selling its California wine brands. Like Fortune’s restructuring, this could simultaneously give the Kentucky company enhanced purchasing power – and make it a tempting target. Just how much would Diageo give for Jack Daniel’s, Herradura and Woodford Reserve? And, unlike buying Courvoisier, such a deal would do nothing to compromise a future deal for Moët Hennessy.
So come on everyone! The rain’s stopped, the sun’s come out and there’s nothing like spending a billion dollars here or there to get the blood racing on a chill January day. You know you’ll feel better for it and, more importantly, you’ll be cheering me up too. What are you waiting for?
Pernod Ricard's Absolut Company division has teamed with 18 artists for a "global creative movement" based on its namesake vodka brand....
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