The family that controls whiskey maker Jack Daniel’s prefers a possible sale to French distiller Pernod Ricard over an alternative proposal from its privately held American rival Sazerac, according to a person familiar with the company’s thinking.
Brown-Forman sees Pernod as a better fit because the combined company would be more diverse in terms of geography and spirit types, according to this person, who requested anonymity discussing private deliberations. Furthermore, the proposed terms for the combination with Pernod would give the family a larger stake in the business and more influence.
As part of the discussions, Brown-Forman and Pernod considered keeping Louisville, Kentucky, as a key region for the new company, but it remains unclear whether the city will be headquarters or just a large hub. The deal under consideration would be 80% in shares and 20% in cash, people familiar with the matter said.
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Talks continue, and these sources say there is no guarantee they will result in a sale of Brown-Forman, which has a market value of about $13.4 billion.
Sazerac plans to submit a $15 billion all-cash bid for Brown-Forman, the report said. New York Times on April 17th. Analysts questioned the logic of a Sazerac deal and warned it could raise significant antitrust concerns due to overlaps between the companies.
Sazerac declined to comment, as did a representative for Brown-Forman. Pernod also declined to comment.
Brown-Forman, which also produces Woodford Reserve whiskey, Herradura tequila and Diplomatico rum, has been a family business for more than 150 years, but, like other spirits producers, it has been under pressure from the sharp drop in alcohol consumption, especially among younger adults.
The U.S. spirits market has been suffering: Sales outside bars and restaurants have grown only about 1% per quarter on average over the past three years, according to data from Bloomberg Intelligence. Brown-Forman shares are in freefall, down 60% in five years.
A union between Brown-Forman and Pernod, which has a market value of around US$20 billion, would create a leader in American whiskey, strengthen Pernod’s position in tequila and expand their global presence. In particular, Brown-Forman would have a better path to expanding Jack Daniel’s sales in China and India, where demand for whiskey is high, thanks to Pernod’s vast distribution network.
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Sazerac, which produces Buffalo Trace bourbon and Southern Comfort liqueur and traces its origins to the 1630s, is much more concentrated in the US, with a portfolio heavily centered on whiskey, which creates greater overlap with Brown-Forman’s product line. Sazerac grew by revitalizing older, undervalued brands purchased from other alcoholic beverage conglomerates.
The Brown family controls about two-thirds of the voting rights in Brown-Forman, but other shareholders looking to reduce exposure to the troubled spirits sector may prefer Sazerac’s all-cash offer.
Together, Brown-Forman and Sazerac would control more than 30% of the American whiskey market in the US, which Barclays analysts said would likely trigger “protracted scrutiny” from regulators — something that might not be necessary in a combination with Pernod.
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A combination with Sazerac “would likely require significant asset divestitures, making a Brown-Forman/Sazerac transaction difficult to achieve in its current form,” Barclays analyst Lauren Lieberman wrote in an April 13 report. “On the other hand, the merger of equals between Pernod Ricard and Brown-Forman continues to look more credible from a strategic point of view.”
Even as the beverage consumption slowdown hits the entire industry, Brown-Forman has fared worse than most — losing market share over the past five years. The company’s share of the global spirits market fell to 5.9% last year — 8th place — compared to 6.3% in 2021, according to Circana data analyzed by Bloomberg Intelligence.
Its shares have significantly underperformed the market over the past five years, during which time the S&P 500 Consumer Staples Index has risen about 30%.
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“The fact that they are having this discussion,” with the share price near a more than decade low, “is a recognition of the challenges the sector faces, particularly in the U.S.,” said Kevin Grundy, an analyst at BNP Paribas.
The U.S. has also been a weak point for Pernod: Sales in the country have fallen 14% this year as President Donald Trump’s trade tariffs have hurt demand for premium brands — a problem compounded by retailers and wholesalers offering discounts to reduce inventory amid weak sales.
“U.S. consumer sentiment remains weak and affordability remains a key issue for some consumers,” Helene de Tissot, executive vice president of finance and technology at Pernod, said in a conference call with analysts on April 16. “Although the US market remains soft, we are convinced that the current challenges are mainly cyclical, linked to purchasing power issues.”
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The doubt about whether the drop in alcohol consumption is the result of short-term factors or a sign of a structural change in demand has dominated the debate in the sector.
The transaction, in a sense, “is a recognition that there are real structural headwinds in the U.S.,” BNP’s Grundy said.
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