According to reports from Reuters, Brown-Forman Corp, owner of Jack Daniel's whiskey, is reportedly leaning towards a deal with French distiller Pernod Ricard SA over a competing offer from its American rival Sazerac Co. The controlling Brown family views Pernod as the more prestigious acquirer, with a portfolio of stronger and more recognizable brands, as reported by Reuters. The contemplated deal would be structured as 80% stock and 20% cash, as confirmed by people familiar with the matter. Sources aware of the discussions told Bloomberg that Brown-Forman sees Pernod as the better fit, as the combined company could be diversified across geographies and types of spirits.
As reported by Reuters, with the potential merger, Brown-Forman could have a better route to market Jack Daniel's in China and India – where demand for whiskey is rising – given Pernod's wide distribution network. The deal would also expand both companies' global reach, with the potential tie-up between Brown-Forman (market cap of about $13.47 billion) and Pernod (market value of about $20.01 billion) creating a leader in American whiskey. Meanwhile, Sazerac plans to submit a $15 billion all-cash offer for Brown-Forman, as reported by New York Times on April 17. Unlike Sazerac's more traditional buyout offer, analysts have said the deal with Pernod could involve a share swap, which would allow the Brown family to preserve some control over the iconic bourbon maker it has run since 1870.
According to Reuters, Brown-Forman shares were down about 1% at $28.94 on Monday, while Pernod shares were flat. The proposed terms of the Pernod bid being contemplated would also allow the family to retain a meaningful stake and some degree of influence in the combined company, as reported by Reuters. Analysts suggest the Pernod deal offers stronger long-term growth in emerging markets like India and Latin America, whereas a Sazerac takeover would transfer full ownership away from the Brown family. The US spirits market is struggling with off-premise sales averaging a stagnant 1% quarterly growth over the last three years, with Brown-Forman facing particular pressure due to a swift drop-off in alcohol consumption.
As reported by Reuters, a merger would consolidate over 30% of the US whiskey market, which analysts at Barclays Plc say would likely trigger an "extended review" from regulators that may not be warranted under a Pernod combination. Sazerac, with roots dating back to the 1630s and making Buffalo Trace bourbon and Southern Comfort liqueur, is heavily concentrated in the US market with a whiskey-centric portfolio that closely overlaps Brown-Forman's offerings. Meanwhile, Brown-Forman and Pernod have considered maintaining Louisville, Kentucky, as a key region for the combined entity, though there is no clarity on whether the city would be the headquarters or just a major hub.
