Pernod Ricard (EU:RI) shares trimmed earlier losses on Friday as investors reassessed reports that the French drinks group is in discussions about a potential combination with Jack Daniel’s producer Brown-Forman (NYSE:BF.A).
The stock had dropped sharply in the previous session after Pernod Ricard (EU:RI) confirmed it was exploring a possible deal with the U.S.-based distiller. By 0744 GMT on Friday, however, the shares had recovered some ground, rising 3.2% to 61.86 euros.
Analysts at Jefferies, J.P. Morgan and Bernstein suggested that a transaction could carry strategic logic, particularly at a time when the spirits industry is facing softer demand for alcoholic beverages and ongoing uncertainty linked to global trade tensions.
In a note to clients, Jefferies said a merger could help revive momentum in a sector that has recently struggled to generate meaningful growth.
Bernstein analysts also cautioned against reading too much into the sharp share-price reaction seen on Thursday. They argued the market’s moves implied a significant shift of value from Pernod Ricard to Brown-Forman and suggested no value would be created, assumptions they said could ultimately prove incorrect.
However, the firm added that even if a deal were completed, it would not necessarily resolve the industry’s most immediate challenge: generating stronger revenue growth.
On Thursday, Pernod Ricard shares finished the session down nearly 6% at 59.94 euros, while Brown-Forman gained 9% to close at $25.74.
J.P. Morgan analysts noted that Pernod Ricard’s already stretched balance sheet could make a transaction of this scale difficult to execute. Nonetheless, they acknowledged the potential strategic benefits, including cost efficiencies and the ability to leverage each company’s distribution networks more effectively.
Based on Thursday’s closing prices, Brown-Forman had a market value of close to $12 billion, while Pernod Ricard’s market capitalisation stood at roughly 15 billion euros (about $17 billion).
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