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France’s Pernod Ricard buys
Vin & Sprit of Sweden
IF WE run, it is to win,” says Patrick Ricard, chairman and chief
executive of Pernod Ricard, a French drinks group. In the past four
months Mr Ricard has done a lot of running. He wanted to capture Vin
& Sprit (V&S), which was put up for sale by the Swedish government
in December and owns Absolut, a premium-vodka brand. And he won. On
March 31st, Pernod Ricard announced its takeover of V&S for €5.6
billion ($8.9 billion) including debt. Initially almost two dozen
bidders showed interest in Absolut, one of the drinks industry’s
most successful brands. Clever marketing campaigns have propelled it
from its Swedish home to leadership of the world’s premium-vodka
market—a fast-growing segment, especially in America, the world’s
biggest market for spirits. The field eventually narrowed down to
Pernod Ricard; Bacardi, a family-controlled drinks company; Fortune
Brands, a consumer-goods conglomerate; and EQT, a private-equity
company controlled by Sweden’s Wallenberg family.
All of them remained keen, even when credit markets turned sour.
Bacardi wanted V&S to bolster its position against unwanted takeover
offers. Fortune is close to V&S: it distributes its products in
America, and the two are partners in Maxxium, a distribution firm.
For their part the Wallenbergs, who control many of the companies
listed on the Swedish stock exchange, are always trying to keep
their country’s corporate jewels in Swedish hands. Pernod won
because it made the best offer. It promised to keep production in
Sweden and to give local management lots of autonomy, as it has
always done with its brands. Yet the price is high: 21 times V&S’s
earnings before interest, tax, depreciation and amortisation last
year. And Pernod is taking on lots of debt. On April 1st Fitch, a
credit-rating agency, changed its verdict on the firm’s
creditworthiness to “junk” and said the outlook was negative.
Mr Ricard says his bankers are confident that the firm can shoulder
the debt. Pernod Ricard has made two debt-heavy acquisitions in the
recent past and has paid down the debt faster than predicted both
times. In 2001 it acquired 38% of Seagram, a Canadian conglomerate
with a large spirits portfolio..—Agencies
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