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Pernod Responds To Activist Investor Critique

December 13, 2018

Yesterday, activist investment fund Elliott Management Corp. took aim at the management of Pernod Ricard, in which it holds a 2.5% stake, urging the world’s second-largest spirits marketer to take steps to shed non-core assets and seek new perspectives on the business with the goal of expanding operating margins. Pernod has responded with a statement of its own, acknowledging discussions with Elliott but defending its recent performance.

In its statement, Pernod noted that its organic sales and operating profit growth ramped up significantly in its fiscal year ended in June—to 6% and 6.3% respectively—with both measures above the medium-term guidance the company issued in 2015. The French drinks giant also highlighted the diversification of its portfolio, both in terms of categories and markets, adding that innovation has accounted for about one-third of its recent growth. Moreover, Pernod observed, it has seen strong progress at the higher end of the drinks market lately, with its luxury portfolio up 10% over the past year.

Pernod says the momentum gained in the year through June has carried over into its current fiscal year, with sales growth accelerating in the first quarter ended in September. The company also parried Elliott’s critique that new perspectives on the business are necessary, noting that it has added three new directors to its board over the last three years.

“Over the past three years, we have created more than €11 billion ($12.5b) of value and our share price has increased by 37.7%,” said Pernod chief executive Alexandre Ricard. “Our strategy is working and is the right one, combining short-term profitability and sustainable, profitable, and responsible growth under a consistent and long-term roadmap.”—Daniel Marsteller

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