Funds advised by Elliott Advisors (UK) Limited (together Elliott) have informed Pernod Ricard S.A. (Pernod or the Company) that they currently hold an economic interest in excess of 2.5% in the Company.
In Elliotts view, Pernod possesses an outstanding portfolio of leading international spirits brands and offers one of the most attractive investment opportunities in the industry, with significant potential for improvement. Despite the favorable economic backdrop for the spirits industry over the last decade, the Company has lost market share across key segments within its portfolio, and underperformed its peers on several metrics. Successive operational improvement plans have failed to generate operating leverage, leaving operating margins at a five-percentage point discount to its closest peer Diageo. Pernods M&A track record has also been disappointing, with the ‚¬6 billion acquisition of Absolut in 2008 falling short of expectations. The result has been a material total shareholder return underperformance relative to its most comparable peers, with the Company notably ranking last among its peer set over the last decade.
Elliotts analysis further suggests that an environment of inadequate corporate governance and a lack of outside perspectives have contributed to this underperformance. Proxy advisory firms and independent corporate governance experts have pointed out Pernods weaknesses on several key governance metrics. In Elliotts view, addressing these deficiencies could help generate significant value for all stakeholders.
Pernods journey from a small local niche player to an iconic French multinational leader has been impressive, and the Ricard family deserves credit for supporting the Companys growth over the years. Elliott believes operational and governance improvements would allow Pernod to unlock much of the value that the Company is capable of delivering, improving the strength and sustainability of the Company for all stakeholders.
Elliott has met with Alexandre Ricard, Pernods CEO, and has written to the Companys Board to share its analysis and views on value creation. Elliotts recommendations include launching a more ambitious operational improvement plan to close the profitability gap with competitors, and aligning corporate governance with best-in-class peers. Elliott looks forward to continuing its constructive dialogue with the Company, and working collaboratively in pursuit of these sustainable improvements.
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Elliott Management Corporation manages two multi-strategy funds which combined have approximately $35 billion of assets under management. Its flagship fund, Elliott Associates, L.P., was founded in 1977, making it one of the oldest funds of its kind under continuous management. The Elliott funds investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, and employees of the firm. Elliott Advisors (UK) Limited is an affiliate of Elliott Management Corporation.
Sarah Rajani CFA
Advisors (UK) Limited
+44 (0) 20 3009 1475