Pernod CEO shoots down merger talk

Alexandre Ricard has left little room for ambiguity regarding recent speculation that Pernod Ricard faced pressure to consider merging with another big group, stressing his firm will “remain a consolidator” in the industry.

Alexandre Ricard has stressed his company “will remain a consolidator”

After Elliott Management Corporation announced it had built a stake of more than 2.5% in Pernod at the end of last year, reports claimed the New York-based hedge fund had recommended that the Absolut maker should explore the option of a merger.

However, at a media briefing in London this morning (12 February), group chairman and CEO Alexandre Ricard called the news “pure market speculation” and reaffirmed Pernod’s position as an industry “consolidator”.

He said: “[We] have been a consolidator in the industry and I hope that it will be no surprise as I reiterate very clearly and specifically: Pernod Ricard is here, Pernod Ricard is here to stay, and Pernod Ricard is and will remain a consolidator.”

Pernod Ricard was formed in 1975 with the merger of pastis makers Pernod and Ricard. Since then the business has grown to become the world’s second largest spirits firm with a market cap of €40 billion, aided through transformative acquisitions including Absolut vodka, Irish Distillers and Allied Domecq.

Elliott, run by Wall Street billionaire Paul Singer, has called for improvements to Pernod’s margins and governance, which it claimed needed more outside influence. The founding family of Pernod Ricard remains its largest shareholder with a 14.2% stake and the biggest board room presence.

Hedge fund Elliott has a reputation for aggressive lobbying of company boards, but Ricard described ongoing talks as “cordial and constructive”.

“We have always said we are open to dialogue with our shareholders generally speaking, and Elliott being one of our shareholders, we continue to be open to dialogue with them,” he said.

“The fact that we can improve operating margin is not a secret – actually it’s at the core of our three-year strategic plan, which we designed alongside our teams a year ago. We are in the first year of that plan and [are] already seeing operating margin pull through.

“The fact that governance can be improved is an endless process. Governance will endlessly evolve today as it has over the last few years, and you should expect to see this continue.”

Company evolution

At the same time as announcing its latest H1 results last week, Pernod revealed its ‘Transform & Accelerate’ plan, a three-year programme that aims to improve operational leverage. Soon after, Elliott issued a statement claiming the strategy set “modest goals” and lacked “specificity and clarity”.

In January, Pernod named former Christie’s CEO Patricia Barbizet as its lead independent director, at the same time as the group’s ex-CEO Pierre Pringuet took a step back.

Ricard said his firm approaches corporate governance with a view of “endless improvement” and “constant evolution” since “static organisations tend to die”.

He continued: “Having outside information and perspective on yourself is always interesting and is always enriching. It doesn’t mean you have to be okay with everything, it doesn’t mean you have to agree with everything.

“But I do like debate and I like to listen: it is always an enrichment.”