Interview

The just-drinks Interview - Pernod Ricard's Outgoing CEO, Pierre Pringuet - Part II

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In the second part of just-drinks' exclusive interview with the outgoing CEO of Pernod Ricard, Pierre Pringuet, here he looks back at some of the deals that have shaped the company, and his role in their negotiation.

Pierre Pringuet has stepped down as CEO of Pernod Ricard today

Pierre Pringuet has stepped down as CEO of Pernod Ricard today

Since becoming joint MD of Pernod Ricard in 2000 – and subsequently CEO eight years later – Pringuet has presided over a period of great change at the wine and spirits group. The two game-changers that he played active parts in securing were the break-up of Allied Domecq with Fortune Brands ten years ago and the acquisition of Absolut owner Vin & Sprit from the Swedish Government in 2008.

I'm keen to get the skinny on exactly how these deals panned out from Pringuet's perspective. He retires today, for goodness sake, he'll be more than happy to dish the dirt. No? “The Allied deal turned out exactly as I expected it to.”

Oh.

“The one thing I didn't expect, though,” - hello! - “ was that it would take two years. We started in 2003, but we'd made contact with Allied as early as 1996. At that time, we had a dual strategy, split between alcoholic and non-alcoholic beverages. Then, we decided to change this strategy and get rid of our non-alcoholic businesses. But, our sale of Orangina to Coca-Cola was barred due to anti-trust issues, so that stopped any move for Allied (at the time) on our part.”

The story behind the final transaction, however, has yet more twists and turns. It is also a time that Pringuet clearly remembers with much fondness.

“In 2004,” he starts the story, “we had lunch with Allied's CEO, Philip Bowman, at a discreet club. He said no to our initial offer, and that he couldn't take the risk. The risk was in the value. I told our lawyer that it was a complete failure, and that he needed to reshuffle his organisation.

“For a seven-digit transaction like this one, there were only eight bankers in London that could handle it. We reviewed them and settled on one guy. I contacted him directly to see if he'd get on board with us and he said 'yes'.” This is all pretty straightforward so far, Pierre. “But, life is strange,” he blindsides. “We discovered that Bowman's banker was an opera fan - he was the chairman of the English National Opera board. What made things easier for us was, our banker was also on the board, and ended up being his successor as chairman.”

And, what of the discussions with Fortune Brands, with whom Pernod partnered to buy Allied for US$14.2bn? Pringuet smiles, cheekily. “We had a disastrous meeting at Heathrow,” he says. “There was a leak to the press. Now, in the UK, the Takeover Panel investigates M&A speculation. They enquired about the reported negotiations. When you're approached like this, you then have limited time in which to make an offer, or you're not allowed to make an offer at all for six months. We discussed the situation with our bankers and we all decided that I should very quickly go on holiday. I went to my ski resort, so our bankers could say that there were absolutely no negotiations."

As well as the leak, the Fortune meeting failed to find an agreement on how to structure an approach. "I decided to meet Beam's CEO on my own, with a restructured proposal," Pringuet continues. "We met in Chicago, had a good dinner, talked about everything but Allied and the following day, we started at eight in the morning and spent the full day reviewing the proposal document. At the end of the day, we had an agreement, which meant we could restart the process.

"So, Allied was... an interesting time!”

Pernod's swoop for Vin & Sprit for EUR5.63bn (US$8.88bn) surprised many at the time. It transpires, though, that Pringuet was also surprised, albeit for slightly different reasons. “In March 2008, we had made a binding offer for Vin & Sprit,” he explains. “We were summoned by the Government's lawyer for one day's exclusive due diligence. The call came at 2200 the day before, and the exclusivity was for the following day in Stockholm. So, we caught the first flight to Sweden."

Again, Pringuet admits that Pernod had held previous designs on Vin & Sprit and its Absolut vodka brand. “We made the first attempt to buy V&S in 2004 - before we completed the Allied deal. We paid them a visit and made a strong presentation. At the end, the head of V&S said: "Ney, takk." Two years later, a different government decided to privatise a handful of businesses. The reality is that we only had around two months between completing the Allied deal and the start of the process for Absolut.

“So, Absolut took almost two years - We spent a lot of time on field communication, in order to portray ourselves as a serious bidder. I remember on the very last day, I was invited by the Treasury Minister to his office, we shared a little bit of chicken, and he said that we'd made the best price. He also noted that we ticked all the boxes. The decision to sell to us was approved by a quorum of ministers in the cafeteria!”

The main fallout of Pernod's purchase of Vin & Sprit – specifically its timing – was the need for the French company to spend the next few years dealing with a high level of debt. Any regrets on Pringuet's part? “First of all,” he counters, “we should not regret the three big bangs: Each of them contributed to the complete transition of Pernod Ricard. We are a global leader today. Beyond ourselves and Diageo, the other spirits players are either regional or they have some strengths in some categories, but they don't have a global presence. There has been no necessity for us to make acquisitions beyond the three big ones we've made.

“In early-Spring 2008, there were signs that there was a downturn. The question we asked ourselves was, should we go for Absolut or not? This was a once-in-a-lifetime opportunity, however. What if our competitor got hold of it? Before Absolut, we were already a big cat. But, there is nothing else that we badly need.”

I argue, however, that the high debt generated by the purchase could have been handled differently, particularly as it signalled the company's absence from any major M&A activity. “Maybe one regret is that we should have made a rights issue straight away as part of the financing of the V&S purchase. We had to wait a year, until 2009. But, that's the only real regret: We probably would not have been compelled to sell Wild Turkey, if we'd done that,” he ruefully adds.

And so, not only is our time together drawing to a close, but so is Pringuet's time in the Pernod hotseat. Today (12 February), he passes on the leadership to Alex Ricard. It sounds, however, like he's going to keep busy. “On 12 February,” he says, “my wife and I are going on a three-week trip to Cambodia and Burma. I will not be around to interfere with the communication of our half-year results!

“I'll continue on Pernod's board as vice-chairman until 2016 and I'm looking for other board positions. I'm also going to be the first non-English speaking chairman of the Scotch Whisky Association. And, I've been proposed for the chairmanship of the School of Agronomy here in France.

“So, I'll have plenty of activities, but I'd like them to fill just half of my time. The rest of the time I'd like to spend on things like travelling, reading, improving my golf.”

I can't resist one final question, relating to the array of Pernod Ricard brands, expressions and variants on display at one end of Pringuet's office. Which one bottle are you taking with you?

“At EUR2,000 per bottle, maybe I should take the Martell l'Or,” he laughs. “But, that may be a bit expensive for a retired man. I'm very fond of Cognac and Armagnac. But, I've been involved in the history of so many of our brands that it's difficult to make a choice.

“Maybe I'll arrange for the whole shelf to be moved to my home.”

The first part of this interview can be read here.


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