Pernod eyes up billion euro acquisition

Pierre Pringuet, the deputy chairman and joint chief executive of Pernod Ricard, says the French group could raise and spend “a few billion euros” on the right acquisition, if one came along.

Pernod Ricard CEO Pierre Pringuet

Since the takeover of Vin &Sprit, which brought Absolut vodka into the portfolio in 2008, Pernod Ricard has focussed on reducing the ratio of its net debt to earnings before interest, tax, depreciation and amortisation (Ebitda) to below four. The reason is to protect the investment grade rating of Pernod Ricard’s bonds in the US and thus its ability to raise funds on Wall Street as and when it wishes to.

“Our net debt ratio is 3.6,” Pringuet said in London last week. “We have confirmed on several occasions that we want to retain our investment grade rating (for our bonds) in the US. We could go above four times net debt to Editda and possibly for a short time above five times, but certainly not six times, which was the case after the Seagram takeover (in 2000), after Allied Domecq in (2005) and after Absolut.” So effectively Pringuet has ruled Pernod Ricard out a mega-deal such as the $16bn Suntory recently spent on Beam.

“It [a potential takeover] would depend on the combined Ebitda of Pernod Ricard plus the target company, plus the benefit of the synergies, so it is difficult to give a precise number. But t we are talking of billions of euros…maybe not €10bn for sure … but a few billion. That is what we could spend if we wished to.”

Earlier this year, Pernod Ricard strengthened its presence in America buy taking a controlling interest in Avion, the super premium tequila which has seen sales soar from 10,000 cases three years ago to 100,000 today. Its 84% stake cost about €100m, roughly the same sum as analysts reckon it spent on Kenwood, the Sonoma Valley prestige wine brand.

But although Pernod Ricard is looking for niche deals to bolster its portfolio and routes to market, it is not interested in Australia’s Treasury Wine Estates.

“It is a both a size (of the deal) and a portfolio issue. We don’t think it would be wise to increase our exposure to Australian wines,” Pringeut said. He made no mention of Treasury’s US assets.

“We are expanding our geographical coverage in wine. We made tactical and significant acquiisition for the US market when we acquired Kenwood in California, which is very well positioned in terms of [premium] price. That is more the sort of thing that we would favour in wine,” he said.

Pernod Ricard has been active in setting up joint ventures throughout Africa and some analysts believe that it is eager to make further inroads on the continent.