Rémy Cointreau’s Shares Jump On Rumors Of Brown-Forman BidApril 4, 2014
After declining sharply over the past year, Rémy Cointreau’s share price jumped on rumors that Brown-Forman was considering a bid for the French drinks group. After financial blog Betaville reported last night that Brown-Forman has been working with several advisers, including Goldman Sachs, on a potential acquisition of Rémy, and that “tentative discussions have been held between investment banking advisers to both companies,” Rémy shares rose by as much as 11% on the Euronext Paris Exchange—to more than €65 ($89)—in this morning’s early trading. By mid-day in Paris, Rémy’s share price surge had cooled, but, at around €62 ($85), they were still nearly 5% above yesterday’s closing.
That upward momentum represented a dramatic reversal of fortune for Rémy, as the company’s shares have fallen by around 40% over the past year amid a slowdown in China, a crucial market for the company because of Rémy Martin Cognac’s local prowess. In recent years, China has accounted for around one-third of Rémy’s turnover. In the first nine months of the company’s fiscal year (ended December 31, 2013), overall sales declined by 12.3% to €964.5 million ($1.325b).
While Betaville mentioned discussions between Rémy’s and Brown-Forman’s advisers (both drinks companies declined to comment on the rumors), the blog added that “the likelihood of a deal at the moment is very slim,” an opinion shared by drinks analysts. Like Brown-Forman, Rémy is a family-controlled company, with the Heriard-Dubreuil family holding majority ownership. (Company chairman Francois Heriard-Dubreuil recently became chief executive in a transitional role when Frederic Pflanz resigned after a short tenure.) Over the years, the Heriard-Dubreuils have steadfastly refused to sell, even as Rémy has at times endured more difficult conditions than it does currently.
Still, Rémy’s strong position in China—one of the few key premium spirits markets around the globe where Brown-Forman’s Jack Daniel’s isn’t a major player—makes it an attractive target, as does its relatively low share price. If Brown-Forman is indeed interested, it may well find competition from some of its rival drinks companies.