Brown-Forman And Pernod Ricard End Merger Talks

By Richard Thomas

Late Tuesday it was announced by the parties concerned that the merger negotiations between French drinks goliath Pernod-Ricard and Kentucky and Tennessee whiskey magnate Brown-Forman proved unable to reach mutually agreeable terms and were terminated. Roughly a month has passed since the two companies confirmed rumors that they were in talks over a merger. During negotiations, Sazerac–the smallest of the three companies at issue–made a $15 billion offer to buy control of Brown-Forman.

The Whiskey Reviewer speculated that such a deal would involve giving the Brown family, who own a commanding majority of Brown-Forman stock, a meaningful and substantial stake in the merged company, which has since been semi-confirmed by leaks reported in the business press. Although Pernod Ricard itself issued a very bare bones statement on the matter, business reporting indicates that Pernod Ricard was unsatisfied with the proposed structure of the new company. Having reached an impasse, talks were broken off.

Stock prices for both Brown-Forman and Pernod Ricard predictably fell sharply in pre-market trading. Following the opening of US trading today, at the time of reporting Brown Forman had fallen 10.6% and Pernod Ricard by 3.54%. Those drops clearly reflect a deflating, as both had trended upwards during the merger talks, but also a prevailing drop in the stock prices for major spirits companies.

Sazerac has not publicly withdrawn its offer to buy Brown-Forman, but the seems unlikely to gain any traction. Accepting a buy-out offer would be the clearest indicator that the Brown family wants out of the whiskey business altogether, and their negotiations with Pernod Ricard strongly suggest the opposite. Also, although Brown-Forman is a publicly traded company, the Browns own a majority of all stock and a dominant majority of the Class A voting stock, making a hostile takeover of the company impossible.