By Abigail Summerville and Nicholas P. Brown
NEW YORK, April 14 (Reuters) - Privately held bourbon maker Sazerac has emerged as an interloper in Pernod-Ricard's attempt to merge with Jack Daniel's owner Brown-Forman, according to a source familiar with the matter, even though analysts still think Pernod's portfolio and global reach make the French spirits maker a better fit.
Brown-Forman was already talking with Pernod https://www.reuters.com/business/pernod-ricard-eyes-potential-deal-jack-daniels-maker-bloomberg-news-reports-2026-03-26/
for a tie-up, but Sazerac recently approached nL4N40S1O7 its fellow Kentucky-based distiller about a deal, the source told Reuters on Thursday, as spirit makers look to build scale to address slowing demand and cost uncertainties.
Brown-Forman is continuing those talks despite Sazerac's approach, another source familiar with the matter told Reuters.
Analysts said Pernod has the inside track. A Brown-Forman/Pernod deal would likely involve a share swap, they said, which would allow the Brown family to preserve some measure of control over the iconic Kentucky bourbon maker it has run since 1870.
None of the three companies would comment for this story.
ONE BOURBON, ONE SCOTCH...
A merger between Brown-Forman and Pernod would create the world's No. 2 spirits maker by sales behind London-based Diageo. Analysts say it could save the combined company as much as $450 million a year, helping offset the decline in alcohol consumption Liquor%20consumption%20has%20been%20falling%20from%20steep%20pandemic-era%20highs,%20as%20the%20cost%20of%20living%20soars%20and%20some%20younger%20consumers%20drink%20less.%20Tariffs%20and%20inflation%20have%20pushed%20up%20input%20costs%20and%20punctured%20bubbling%20demand%20overseas.%20And%20now,%20fallout%20from%20the%20Iran%20war%20threatens%20to%20increase%20energy%20costs. from pandemic-era highs. Over the last five years, shares of the two companies have both lost roughly 60% of their value.
Paris-listed Pernod, with its massive distribution machine in Europe and Asia, is dominant in Scotch whisky, with brands including Chivas and The Glenlivet. Brown-Forman is best known for Jack Daniel's, but also has a notable tequila business through its Herradura and El Jimador labels.
The U.S. market accounts for 44% of Brown-Forman's net sales, but demand there is lagging. Combining with Pernod would be better for growth than merging with Sazerac, said Morningstar analyst Kristoffer Inton. A Pernod merger could give Brown-Forman the chance to make inroads in non-traditional markets such as in India and Latin America, where whiskey demand is still growing, he said.
"If it takes off, that will be the brand in the market that people recognize, and it will probably get a little bit of cachet," Inton said.
Savings would mostly come from the companies' U.S. and European operations, offsetting the higher costs of barreling whiskey for Brown-Forman in recent years, Bernstein analysts said.
A DEPARTURE
Sazerac's interest in Brown-Forman is a departure from its recent playbook, which has involved buying underperforming brands from large conglomerates - like Constellation Brands' Svedka in 2024 https://www.reuters.com/markets/deals/constellation-brands-sell-svedka-vodka-sazerac-sharpens-focus-premium-spirits-2024-12-03/ - or small, younger labels like BuzzBallz, a source familiar with the company said.
Sazerac's differentiator lies in its familiarity with Brown-Forman, stemming from the two companies' ties in Louisville’s historically clubby bourbon industry. If combined, the two would have more clout in negotiations with major U.S. distributors, industry M&A advisors said.
The combination could also trigger antitrust concerns, however. The new entity would control 13% of the U.S. market, a tick behind Diageo's 15%, and its share of American whiskey would rise to 30% alone, according to Jefferies analysts. That could lead to divestitures, industry sources said.
"The strategic logic is less compelling vs a Pernod deal," Jefferies said.
FAMILY LEGACY
Sazerac, controlled by the Goldring family, would likely need to buy out Brown-Forman in cash, forcing the Brown family to give up control, industry M&A advisors said. Such a deal would likely involve debt, making the combined company more highly leveraged.
Pernod could structure a deal as a share swap, giving the Browns a slice of the new company and some governance rights, said the sources familiar with the matter.
The Browns own over 50% of Brown-Forman's voting stock. The Ricard family controls 21% of Pernod's voting rights. But even in a deal that Pernod and Brown-Forman characterized as akin to a merger of equals, it is not clear how much control the Brown family would retain.
"A merger still has complications, especially when families are involved," Barclays analysts said in a note last week.
(Reporting by Abigail Summerville and Nicholas Brown in New York; Editing by Lisa Jucca and David Gaffen)
