Pernod Ricard, the French distiller being targeted by activist investor Elliott Management, could fall prey to a joint bid by luxury group LVMH Moet Hennessy Louis Vuitton and rival distiller Diageo, according to analysts at Berenberg.
A consortium-led acquisition of Pernod by LVMH and Guinness-owner Diageo is "a likely scenario", luxury-sector analysts at Berenberg led by Zuzanna Pusz wrote in a report yesterday.
Paris-based LVMH "could take the lead in a potential bid", while such a transaction could put an end to a joint venture that LVMH and Diageo have had since 1987, she wrote.
Such a deal could unite irish drinks brands including Guinness and Jameson under a single corporate umbrella, but would face competition hurdles.
Elliott disclosed a stake in Paris-based Pernod Ricard, the world's second-largest distiller, in December.
The activist investor controlled by billionaire Paul Singer wants the company, whose products include Absolut vodka, to slash costs and overhaul corporate governance.
The co-founding Ricard family, which has expanded the business over almost half a century, wants it to stick to a strategy that produces consistent long-term shareholder returns. Elliott's involvement is a "game changer" and could potentially remove obstacles to an unsolicited approach, Berenberg said. Investors aren't buying the idea of a potential deal for now. Pernod stock was down 0.5pc at one stage in Paris yesterday, with LVMH shares little changed and Diageo trading 0.6pc lower in London.
Media representatives at LVMH didn't immediately respond to requests for comment. A spokesman for Pernod Ricard referred to comments made last week by CEO Alexandre Ricard, who said the French distiller "will remain a consolidator". A spokeswoman for London-based Diageo declined to comment. LVMH CEO Bernard Arnault brushed off speculation in January that he might have had a hand in pushing Elliott on the Pernod Ricard front. "We have nothing to do with any of that," Mr Arnault said at the time. "No one from our company knows Elliott, the activists, investment fund. We have no contact with them. Secondly, Alexandre Ricard and our family are friends."
Berenberg estimates that LVMH has close to $40bn in resources for takeovers, so a joint purchase of Pernod would "make sense" for the luxury conglomerate, not only financially but also from a regulatory point of view, Ms Pusz said. "An efficient split of brands between LVMH and Diageo should overcome any regulatory hurdles that such a deal would face", enabling the owner of the Louis Vuitton brand to increase its presence in the attractive brown-spirits category, she wrote.
Additional reporting by Bloomberg