Pernod Ricard acquires V&S Absolut Spirits

Nicole Mezzasalma

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The €5.6bn ($8.9bn) purchase makes Pernod the co-leader of the global wine and spirits industry

Pernod Ricard has announced the acquisition of V&S Absolut Spirits from Sweden. The €5.6bn ($8.9bn) deal excludes V&S’s 10% interest in Beam Global Spirits & Wine. Following the purchase, Pernod Ricard will become the co-leader of the global wine and spirits industry. According to the company, the acquisition will also give it a leading position in the Nordic market through V&S’s portfolio of local brands.

Absolut is the number one premium vodka brand worldwide with 11m cases sold in 2007, up 9% compared with the previous year. Other V&S brands include Cruzan rum, which recorded a 27% rise in sales to 600,000 cases in 2007, and Level, the fourth best-selling super-premium vodka in the US.

V&S’ brands are currently distributed in travel-retail through Maxxium Global Travel Retail, a joint venture between V&S, Fortune Brands, the Edrington Group and Remy Cointreau where each partner has a 25% shareholding. Pernod Ricard said in a statement it plans to exit Maxxium within two years from closing the deal “for a low contractual cost”.

Pernod Ricard chairman and CEO Patrick Ricard said: “The acquisition of V&S 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.”

Pernod added that the transaction will generate estimated €125-150m ($197-237m) pre-tax synergies on an annual basis, which are expected to be fully obtained over two to four years. The statement also said that the return on investment from Absolut should exceed Pernod’s cost of capital in four years at the latest.

The company hopes the transaction will be completed in the summer following the necessary regulatory clearances.