FRENCH DRINKS group Pernod Ricard is to sell its Wild Turkey bourbon brand to Italy’s Campari for $575 million (€432.5 million) and plans to launch a €1 billion rights issue to cut debt.
The cash call, which coincided with a profit warning, highlighted concerns about Pernod’s ability to manage its net debt of more than €12 billion in the current unpredictable environment, analysts said.
Pernod, the world’s second-biggest drinks group behind Diageo, borrowed heavily to acquire Absolut vodka maker Vin Sprit AB from Sweden in July last year and had to sell some brands to meet European Commission competition requirements. In Ireland it owns Irish Distillers Pernod Ricard whose flagship brand is Jameson whiskey.
“We think it’s the right thing to do in the current environment,” deputy managing director for finance Emmanuel Babeau told investors.
Wild Turkey, which was not a strategic brand for Pernod, competes with US brands Jack Daniels, part of Brown-Forman and Jim Beam, owned by Fortune Brands.
A bigger brand for Campari than for Pernod, Wild Turkey may benefit from increased investment from Campari, analysts said, and step up competition in the market for accessibly priced whiskey.
Pernod has been trying to keep abreast of the rapid consolidation of the global drinks market and like many of its peers has had to take on much debt in the process.
InBev, brewer of Stella Artois and Beck’s, last year struggled to pull off its $52 billion acquisition of Budweiser maker Anheuser-Busch, which it financed partly with a $9.8 billion heavily discounted rights issue.
After buying Vin Sprit, Pernod pledged to dispose of €1 billion worth of assets and overall gross disposal proceeds now total €577 million, it said.
“The message sent to the market . . . does not show great confidence in the evolution of its activities over the next few quarters and in its ability to raise funds in the best conditions,” Natixis said.
Campari, best known for its bitter red aperitif of the same name, said yesterday the Wild Turkey cash deal was priced at about 12 times expected earnings before interest, tax, depreciation and amortisation (Ebitda) for the first 12 months after the deal’s closing, expected before June 30th.
One Milan analyst said the price was in the range of deals seen in the sector in 2008. “We believe this looks reasonable given historic multiples of 14-16 times,” said UBS analyst Melissa Earlam.
Wild Turkey will add €100 million to sales on an annual basis, Campari’s chief executive Bob Kunze-Concewitz told a press conference. “We have done a big acquisition and we (will) stop them for now,” he said. – (Reuters)
