BUSINESS NEWS

Plimsoll identifies acquisition targets…Pernod asks shareholders to approve poison pill…Champagne adds sparkle to remy Cointreau…Grant buys out Bacardi…Foster’s sells wine clubs…Cotts rises regardless

Plimsoll identifies acquisition targets

The Overall Value of the UK’s largest wine and spirits wholesalers   has gone up by 7%, according to recent research by Plimsoll Publishing. The 260-page report  analyses the valuations of the UK’s 100 largest companies in the sector over a four-year period. The study concludes that 61 of the companies included have seen their values increase by 22% as a result of increased profitability.

But 38 of the companies analysed have seen their value fall by  an average of 11%. This includes five companies that saw their value halved during the period.

Plimsoll has identified eight companies with acquisition potential. David Pattison, senior analyst at Plimsoll, explains, “Blatantly undervalued, these companies have the potential to double in value, if staff costs, debts and other expenses are brought under better control.”

These companies are likely to attract interest from private equity investors and industry buyers, says Pattison. “We’ve taken a long term view and looked at each of these companies over the last four years. No wonder there is so much acquisition speculation in the market when the valuations change so rapidly from year to year.”

Pernod asks shareholders to approve poison pill

Pernod ricard has been surrounded by rumours of a hostile takeover after it was revealed that the company board will ask  shareholders to accept a so-called “poison pill” mechanism at the group’s annual general meeting this month.

This mechanism, which allows the board to issue warrants convertible into shares at a discounted price in the event of an unsolicited takeover bid, would allow the board to obtain the best price for Pernod Ricard’s stock if it were to be the target of a hostile bid.

The measure was introduced by the French government earlier on this year and has been adopted by  luxury goods manufacturer Hermès Internationale, among others. Currently, the Ricard family  controls 17.48% of shareholder votes, after it increased its stake in the company from 9.36% to 10.09% earlier on this year.

Champagne adds sparkle to remy Cointreau

Piper-heidsieck has driven double-digit growth for Rémy Cointreau’s Champagne division. The Champagne saw its sales increase by 13.8% in the first 6 months of this year, thanks to higher volumes combined with a price increase and a greater product mix. The brand proved particularly popular in the US and Japan.

The group’s Cognac and Liqueur & Spirits divisions also grew by 4.2% and 2.7% respectively. Rémy Martin showed strong growth in Russia, China and the US while Cointreau grew its sales the US.

But, despite these results, Rémy Cointreau’s consolidated turnover  only grew by 1.3% in the first half of the 2006-07 financial year due to the poor performance of Remy’s partner brands in the Scotch whisky and California wine categories. According to the group, the decline in overall sales was due to the end of a number of distribution contracts at the end of the last financial year. 

Grant buys out Bacardi

 William grant & Sons has bought out its partner in UK distribution business First Drinks Brands. Ten years after setting up the joint venture together, Bacardi Martini has decided to sell its 50% stake in the company to William Grant after reintegrating a number of brands into its portfolio.

The company distributes William Grant’s total UK portfolio of brands including Glenfiddich, The Balvenie and Hendrick’s Gin.

The company also manages the distribution, sales and marketing for Bénédictine Liqueur and for other third party agency brands De Kuyper/Warninks, Disaronno, Mateus and Amarula in the UK. This acquisition will significantly increase William Grant’s control of its route to market.

Foster’s sells wine clubs

foster’s Group has begun the disposal of its wine clubs and services. The sale follows the company’s announcement in August that it would sell the operating division in order to focus on premium alcoholic beverages. Foster’s wine club business has been valued at between A$340m and A$400m. Despite recording sales of A$538m this year, the division has been struggling. Earnings in the division fell 10.7% to A$39.1m in the 12 months ending June 30, while sales volume fell 8.9%. The business’ clubs include Cellarmasters in Australia and Mad About Wine in the UK, among others.

Cotts rises regardless

The soft drinks company’s share price increases against the odds

This month Cott Corporation, the world’s largest provider of own-label soft drinks, has seen its share price rise by 37.86% despite a number of setbacks in the past quarter. The company was forced to shell out US$2.5m in compensation to ex-CEO John Sheppard after he was fired following a series of weak quarterly figures. Cotts also announced losses of US$2.1m in Q1 and took a profit plunge last year. Now, Brent Willis, the company’s new CEO and former Inbev executive, has decided to make a number of job cuts and overhaul his senior management team.

The beer sector remains buoyant with many brewers reporting double-digit returns. Carlsberg was up 23.44% despite recent job cuts as investor confidence grew following the  renewal of Carlsberg’s lucrative four-year sponsorship deal with The Football Association. Investors may also be banking on the brewer making a move into India following rumours that Carlsberg is in talks with Indian company Himneel Breweries in a possible deal worth US$7.8m.

Meanwhile, Pernod Ricard’s share price rose by just under 10%, after announcing positive full year sales figures in July.

In the past three months, the MSCI Hotels, Restaurants and Leisure Index has outperformed both the MSCI ACWI Beverages MSCI ACWI Food Products indices, despite rising interest rates and an increase in retail inflation, which are likely to affect the amount of average disposable income in the UK.

© db November 2006