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Analysis - No shopping spree for Pernod Ricard

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It looks like the days of transformational acquisitions are behind Pernod Ricard. These days, the company is keener to maintain its investment grade rating than embark on a shopping spree.

Since acquiring Vin & Sprit – and subsequently the Absolut vodka brand – in 2008, Pernod has been in more of a divestment mood than an acquisitive one: The US$8.88bn paid for V&S made quite a hole in the company's books.

The last six years have seen a raft of sell-offs, including Wild Turkey to Campari and Bisquit Cognac to Distell in 2009 and Danish aquavit brands Aalborg and Brøndums to Arcus-Gruppen in 2012.

Today, Pernod's net-debt-to-EBITDA ratio stands at 3.6, which is at the healthier end of the company's bracket. But, that's not to say the company is looking to go shopping any time soon.

“We want to retain our investment grade rating,” CEO Pierre Pringuet told journalists at a briefing in London today. “To do this, we'd be allowed to go above four-times net debt to EBITDA, and possibly, for a short period of time, above five times, but certainly not above six times, which was the case for (the purchases of) Seagram's, then Allied Domecq, then Absolut.”

We are more likely, then, to see bolt-on purchases, such as its stake in Avion Tequila from 2011 – since raised to 84% earlier this year - and California's Kenwood Vineyards, which was bought in April.

Back in 2012, Pernod countered: “If you look at the last 12 years, we've been the main consolidator in our industry. We've been very active in M&A; the last (major) deal was just four years ago.”

Two years on, and it's clear to see that, when it comes to big-play M&A, the       Paris-based company is trading on its past rather than its future. And, Pernod seems to be perfectly happy with that.


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