Pernod Ricard Has Held Merger Talks With Jack Daniel's Maker, Source Says

Pernod Ricard and Brown-Forman Explore Merger to Navigate Industry Challenges

Potential Merger Amidst Industry Headwinds

By Emma Rumney

March 26 (Reuters) - France's Pernod Ricard and Jack Daniel's owner Brown‑Forman have held talks about a possible merger, a source familiar with the matter told Reuters, a move that would unite the world's second-largest spirits maker with the largest player in American whiskey.

Industry Pressures and Market Performance

Spirits companies are battling a multi-year sales slump amid slowing demand and tariff pressures, which has triggered a slide in valuations, CEO exits and asset sales to cut costs.

Shares of Brown-Forman, which has a market capitalization of about $11 billion, were up as much as 21% in afternoon trading on Thursday, while those of Absolut vodka and the maker of Chivas Regal whiskey fell nearly 6%.

Pernod Ricard has a market value of about 16 billion euros ($18.45 billion) and an extensive spirits portfolio that includes Irish whiskey, scotch and tequila, but relatively little exposure to American whiskey.

Restructuring and Consumer Trends

Brown-Forman and Pernod Ricard have recently cut jobs or launched restructuring plans. Cash-strapped or health-conscious drinkers in key markets like the U.S. already were cutting back on drinking before President Donald Trump's administration raised import tariffs, while emerging threats like fast-growing cannabis drinks also threaten sales.

Tariffs also have forced spirits companies to absorb price increases or pass them on to drinkers, hurting sales.

Synergies and Strategic Considerations

Analyst Insights

'CLEAR OVERLAPS'

Javier Gonzalez Lastra, an analyst at Berenberg, said a merger between the two companies would not solve their growth challenges, though he noted there were clear synergies.

"They have clear overlaps in the U.S., there is also some overlap in Europe," he said, adding that a deal could deliver "significant cost savings".

"I see this as a defensive move, given the industry environment."

Ownership and Governance Factors

TD Cowen analysts pointed out in a note that the Brown family, which has significant voting control in Brown-Forman, have resisted such deals in the past, but may be more receptive given the industry's weak growth and uncertain timeline for recovery.

Executive Compensation and Change in Control

Brown-Forman introduced a plan last October to provide for severance pay and benefits to executives whose employment is terminated due to a change in control. It said at the time that the move was effective immediately and described it as part of its regular review of corporate governance and executive compensation policies.

Brown-Forman did not immediately respond to Reuters' request for comment.

Deal Status and Reporting

Deliberations are ongoing with no certainty a deal will be reached, according to Bloomberg News, which first reported on the talks.

($1 = 0.8672 euros)

(Reporting by Neil J Kanatt in Bengaluru and Emma Rumney in London; Editing by Shreya Biswas, Anil D'Silva and Paul Simao)