Pernod puts BWG on market after Seagram purchase

 

BWG Limited, the franchise holder for Spar in the Republic, is being put up for sale by Groupe Pernod Ricard following the French company's $8.15 billion (€9 billion) joint purchase of Seagram's drinks arm with Diageo. The Irish distribution company, which also has the Mace franchise in Northern Ireland, is estimated to be worth €300 million (£236 million) on the basis of its most recent figures. Pernod Ricard needs to dispose of non-core assets such as BWG to meet its $3.15 billion portion of the bill for Seagram's wine and spirits business. Diageo - the owner of Guinness - will pay the remainder of the $8.15 billion price tag. Other companies in the Pernod Ricard stable that are now up for sale include Orangina, its orange soft drink unit that is merged with Pampryl fruit juices. Analysts say Orangina could fetch €800 million. The Oddbins wine shop chain in Britain may also be sold - along with the group's 1.3 per cent stake in French bank Societe Generale, worth $300 million.

Mr Richard Burrows, the joint managing director of Pernod Ricard, confirmed that BWG was one of the businesses that was up for sale, although he cautioned that the disposal programme could take several years to complete. "It will be at the right time and at the right price," he said. He added that BWG was the best-performing of the non-core businesses in the group and as a result Pernod Ricard would be reluctant to sell it because it would dilute earnings.

BWG had a turnover of €938 million in 1999 and made a profit before tax of €35 million, which was up 30.6 per cent on the previous year. Distribution companies are usually valued in the region of eight times pre-tax earnings which would put a €300 million price tag on BWG. The company, which is headquartered in Dublin, has 1,903 staff.

As well as the Spar and Mace franchises in the Republic and the North respectively, BWG has several other operations including the Spar franchise in the south-west of England and part of the Mace franchise in the Republic. BWG is a subsidiary of Irish Distillers which was bought by Pernod Ricard 12 years ago. Irish Distillers produces the Jameson and Bushmills Irish whiskey brands and stands to benefit from the deal with Seagram, predicts Mr Burrows. Pernod Ricard is acquiring Seagram's scotch and whisky brands, including Chivas Regal, as well as Martell cognac and Seagram's gin. The transaction moves the French group up to third place in the world drink company rankings and number two in the scotch whisky market. "It doubles our wine and spirits operation - in terms of both geographic and portfolio spread," said Mr Burrows. The expansion will result in wider and better distribution of Jameson and Bushmills worldwide. Being part of a stronger drinks portfolio will also make the marketing and distribution of the Irish brands more effective as they can piggyback on the better-known brands.

Pernod Ricard no longer publishes figures for Irish Distillers but the Irish operation is understood to have accounted for around a quarter of the company's profits of €340 million last year. Jameson is the group's fourth-biggest selling brand with 1.2 million cases sold last year, but its position in the pecking order will fall with the acquisition of other leading world brands from Seagram.