Pernod Ricard Acquires Absolut Maker, Shares Fall Slightly

Earlier this week, Pernod Ricard signed a contract with the Kingdom of Sweden for the acquisition of 100 percent of the shares of the Vin & Sprit Group (V&S), the owner of Absolut vodka. The acquisition does not include V&S' 10 percent interest in Beam Global Spirits & Wine, Inc.

Pernod Ricard will pay 1,450 million plus $6,050 million and also assume net debt of 346 million as of 31 December 2007, resulting in a total enterprise value of 5,626 million. The price was deemed high by analysts, and Pernod Ricard shares dropped 4.27 percent to 65.18 euros on the Paris stock exchange on Monday, April 31 after the deal was announced.

Currently, Absolut is one of only four international spirits brands in the world that sells more than 10 million cases a year with a profile of more than nine percent volume growth in 2007. According to a statement from Pernod Ricard, Absolut fits with Ricard's strategy and further enhances its brands portfolio, complementing Chivas, Ballantine's, The Glenlivet, Jameson, Martell, Beefeater, Ricard, Malibu, Kahlua, Havana Club, Mumm, Perrier-Jouet, Jacob's Creek and Montana brands.

This deal advances Pernod Ricard's position in the United States spirits market from No. 4 to No. 2 with a market share of close to 14 percent. Internationally, Absolut is expected to benefit from the strength of Pernod Ricard's globally integrated distribution network, both in mature Western European markets as well as in high-growth emerging regions.

Patrick Ricard, chairman and CEO of Pernod Ricard, states "The acquisition of V&S by Pernod Ricard is a fantastic opportunity and represents our third transformational acquisition since the Seagram and Allied Domecq transactions. Absolut is an exceptional brand. Its integration within our portfolio of premium brands combined with the strength of our worldwide distribution network paves the way for outstanding growth prospects. We become thus the co-leader of the global wine and spirits industry."

            Meanwhile, shares of Fortune Brands Inc. - the other major contender in the auction for V&S - rose $4.29, or 6.7 percent, to $68.15 on Monday after it authorized the repurchase of up to 15 million shares of its stock following the collapse of its bid for Absolut vodka.

"While we had hoped to purchase ABSOLUT at the right price, we didn't hesitate to put our shareholders' interests first," says Bruce Carbonari, president and chief executive officer of Fortune Brands.  "We took a disciplined approach that carefully evaluated numerous factors, including growth and returns prospects, the current state of currency and capital markets, and attractive alternatives for the use of our financial resources. We didn't see the appropriate return for our shareholders at the announced price, so we preserved our financial flexibility to create significant value in other ways."

The company also announced that it will initiate the repurchase of the 10 percent equity stake in its Beam Global spirits business currently held by V&S.