Brown-Forman and Pernod Ricard are in talks over a deal to form a “partnership akin to a merger of equals”, the Jack Daniel’s maker has said.
Earlier today, Bloomberg and Reuters reported the spirits giants had held discussions over a possible transaction.
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In the wake of the reports, shares in Brown-Forman jumped but Pernod’s share price fell.
“We note the recent market rumours regarding a potential business combination involving Brown-Forman and Pernod Ricard,” a brief statement issued by the US group at after 10pm UK time read.
“Brown-Forman regularly explores and evaluates strategic opportunities and can confirm it is engaged in discussions with Pernod Ricard.
“If agreed and subject to customary approvals, this partnership would be akin to a merger of equals, drawing from the talent and expertise of both companies and creating value for shareholders.”
The Herradura Tequila maker added: “Synergies from the contemplated combination are expected to be significant, creating a global spirits leader with enhanced scale, a powerful brand portfolio and a balanced geographic footprint, all anchored by two iconic families.
“No agreement has been reached as to the terms of any possible transaction, and there can be no assurance that any such agreement will be reached. Brown-Forman does not intend to comment further unless and until an agreement is reached.”
Just Drinks has approached Pernod Ricard for comment.
A deal would bring together two of the world’s largest distillers. As well as Jack Daniel’s, the Brown-Forman product range includes Woodford Reserve whiskey and Diplomático rum. Pernod, the world’s second-largest spirits group behind Diageo, owns brands including Beefeater gin, Absolut vodka and Chivas Regal whisky.
The spirits industry has faced pressure on consumer demand, particularly in major markets including the US and China.
Last month, Pernod reported a 15% drop in its net sales in the US, a decline the company attributed to the “soft” spirits market in the country. The US made up 17% of the company’s net sales in the period. Group sales were down 5.9% organically and 14.9% on a reported basis at €5.3bn ($6.11bn).
“Consolidation given the industry slowdown makes sense,” Stefano Di Napoli, the founder of the UK-based Consumer Products Growth Strategy consultancy, told Just Drinks earlier today. “Pernod Ricard is strong in vodka and aperitifs, while Brown-Forman brings premium American whiskey, creating low overlap, so it can make sense from a portfolio perspective. It can also help Pernod’s weak US position with a strong local. The main concern is Brown-Forman’s high inventory levels, driven by slowing demand and how they will deal with it.”
Earlier this month, Brown-Forman booked its financial results results for the nine months to 31 January, the company saw its reported net sales fall 2% to $3.08bn, Net sales in the US declined 8% and by 1% organically.
