Singer wants Pernod, but not ‘the usual’
Like a good martini, maybe the board at this liquor maker needs to be shaken.
Activist investor Paul Singer unveiled a $1.1 billion stake in Pernod Ricard — the French-based liquor empire behind Beefeater gin, Absolut vodka and Chivas Regal whiskey — while claiming that the board of directors needs to get diversified.
Although there’s been a “favorable economic backdrop” for the booze business over the past 10 years, Pernod has given up market share to competitors, Singer’s Elliott Management said.
The $35 billion hedge fund noted that Pernod’s operating margins were 5 percentage points below rival Diageo, which owns brands such as Smirnoff, Captain Morgan and Johnnie Walker.
Elliott said it has had “constructive dialogue” with Pernod Chief Executive Alexandre Ricard, the grandson of Paul Ri- card, the late founder of the eponymous brand.
Nevertheless, Elliott noted that a “lack of outside perspectives” on Pernod’s management team and board has contributed to the brand’s underperformance.
More than 15 percent of Pernod’s shares are held by family members, potentially making it difficult for Elliott to quickly force change. Still, investors cheered the move, with shares up 6 percent in Paris trading.
“We see Elliott’s 2.5-percent stake in Pernod Ricard as a material positive for the company if it leads to an improvement in operating leverage,” analysts at RBC Capital Markets said in a note.
Pernod acknowledged Elliott’s investment, noting that it “values constructive input” from shareholders. But it appeared steadfast in its strategy. “We are a group with strong family values committed to long-term value creation,” Ricard said.