Brown-Forman has reportedly turned down a takeover offer from fellow US distiller Sazerac.
The Jack Daniel’s maker rejected a bid worth around $15bn, The Wall Street Journal said yesterday (12 May).
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According to the WSJ, which cited unnamed sources, advisers for Brown-Forman told Sazerac on Monday their client was declining a $32-a-share, all-cash offer.
Shares in Brown-Forman closed yesterday at $26.56.
The WSJ reported last month that Sazerac – home to brands including Southern Comfort and Svedka – had made an approach to Brown-Forman.
Sazerac’s reported overtures came a fortnight after Brown-Forman and Pernod Ricard announced they were in discussions over a deal to form a “partnership akin to a merger of equals”.
Late last month, the two distillers said their talks over a possible transaction had ended without agreement.
Reflecting on the latest WSJ report, analysts at Bernstein said they were not surprised the publicly listed but family-controlled Brown-Forman had passed up on the bid.
“The Brown family and Brown-Forman’s management have made a deliberate effort over the last two decades to increase Brown-Forman’s exposure to brands at premium price-points,” Bernstein’s analysts wrote in a note to clients.
“We question their appetite for adding Sazerac’s mainstream brands, including Fireball – not withstanding its phenomenal multi-year growth – to the portfolio. We also note that the land of high-abv and electric-coloured RTDs – including the very successful BuzzBallz – is not one for the faint-hearted and comes with volatility.
According to Bernstein, the Brown family owns an economic stake in Brown-Forman of around 26%. It also has approximately 73% of the voting rights in the El Jimador Tequila maker through Class A shares.
The Bernstein analysts cautioned the holders of Brown-Forman’s Class B shares might be frustrated at the purported turn of events.
“Brown-Forman’s Class B shareholders have no voting rights. However, given the alleged rejection of Sazerac’s cash offer by Class A shareholders, we believe there is a risk that Class B shareholders organise a class action lawsuit,” the analysts said.
“Beyond this, following the termination of discussions with Pernod Ricard regarding a potential combination, it’s back to business-as-usual for Brown-Forman. This includes how to improve topline growth against a challenged US alcohol backdrop and weakening consumer environment and how to manage intensifying COGS headwinds from costly barrelled whiskey.”
