This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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Pernod Ricard, the listed French alcoholic beverages group, is likely to divest non-core wine and vodka brands as part of its stated plans to reduce its debt level in the aftermath of its recent Absolut premium vodka acquisition, sources told mergermarket. Last week Pierre Pringuet, Managing Director of Pernod-Ricard, revealed to investors the company’s intention to dispose of some EUR 1bn of non strategic brands over the next 12 to 18 months in an effort to decrease its debt levels
An industry source said he expects the company to dispose of its wine assets, as they are no longer considered as strategic. Important wine assets in Spain and Argentina, inherited from the acquisition of Allied Domecq, are likely to be divested, according to this source.
A Pernod spokesperson in Paris declined to comment.
The insider said that the EUR 1bn of disposals which Priguet referred to last week related to the total income Pernod hoped to get from them, as opposed to the value of a single brand sale. Preparations are underway for the disposals but no advisers have yet been appointed ”although there are some informal talks with banks we can’t disclose,” the insider added. Gronstedts Cognac in Sweden is the biggest disposal planned, the insider added. Up for sale is also Dry Anis in Finland, Serkova vodka in Greece, Lubuski gin in Poland and Star Gin and Red Port.
In the wine area, Paris-based analysts said the most likely candidate for a divestiture is Bodegas y Bebidas, the Spanish wine company that Allied Domecq bought in 2002 for EUR 337m. Bodegas y Bebidas has several brands including Campo Viejo. Such brands have a very small export activity, analysts said.
In South America, the Argentinean company Graffigna , which Pernod also inherited from Allied, is also likely to go. Allied had paid USD 43m for such company.
A logical bidder would be listed Fairport, New York-based Constellation Brands because it has a huge product portfolio it is constantly seeking to expand in order to reach a larger number of consumers, one of the sector analysts said.
According to him, LVMH would only be interested in Montana because it is perceived as a high standard brand which can operate at an international level.
However, sector analysts agreed Jacob’s Creek (Australia) and Montana (New Zealand) are not likely to be disposed as they are both considered “high range” brands and therefore appear as strategic assets for Pernod.
When asked by this news service shortly before the Absolut acquisition if he would divest wine assets, Patrick Ricard, the group’s CEO said he would be ”pragmatic”.
Pernod Ricard has focused its growth especially on spirits drinks, industry source said. Kahlua and Chivas brands have suffered in the current market conditions “as the spirits are the first goods to be cut when the market is difficult”.
However, it is unlikely that the French giant would dispose of them because they are considered as strategic to the company, the source explained.
Attracting buyers would also be difficult as the spirit market is still selling at high prices. Interested players would face problems in raising financing at current market conditions.
Another industry source confirmed it is very unlikely that Pernod will divest Chivas whiskey or Beefeater gin, highlighting they are core business to the group. The source nonetheless added Kahlua could also be divested, arguing the liquor brand was “old fashioned” and would need “many investments” to face competition from trendy Baileys.
A sector analyst agreed Kahlua is very likely to be sold, stressing the company already tried to boost the brand through Kahlua Hazelnuts product launch, which ended not as successful as expected. According to the analyst, it would require too much investment to turn Kahlua into a trendy brand. In the same time, it is profitable and could be sold up to EUR 250m, he specified. Logical bidders would be a middle size US spirit player seeking to expand its portfolio and to access new retailing points.
According to a second industry source, the Paris-based company is also likely to sell its “marginal” vodka brands in Greece and in Finland. However these disposals, which the company confirmed during its earnings call last week, are very small in size and have arisen as a result of anti-trust commitments from the Absolut deal. They are separate from the EUR 1bn strategic brands sales revealed last week which are to be used to pay down debt.
A company source in Greece said there is a sale plan underway for Serkova. An adviser for Serkova has not yet been appointed, but Pernod would welcome any pitches from potential advisers. In the case of Serkova, they may get directly in touch with Pernod Hellas.
”Interest bidders should also contact us directly. We are not yet in a position to decide on the timetable,” he said. ”When the MOI is ready we will send it out. Mini Ouzo will not be sold,” this company source added.
A company insider also mentioned Greek Serkova as a marginal vodka brand that it planned be divested. ”Serkova is a small brand, but I am sure we will get plenty of companies - local and elsewhere - interested,” the insider said. An industry source in Greece said that there is expected to be plenty of interest in the disposal of Serkova. He added that Mini Ouzo is also a popular brand owned by Pernod out of Mytilini, but he would not comment on the likelihood of Pernod selling that one.
Amvyx was the distributor of Serkova, which is made in Poland and bottled in Greece, he said. However Absolut’s current distributor, Amvyx, ”is not best pleased at losing the distribution of Absolut in Greece as Pernod Hellas will distribute it in return for the EC proviso they must shed Serkova.”
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