Posted on March 31, 2008 at 5:44 PM
Filed under: Acquisitions | Corporate Strategy
Tagged: absolut , fortune brands , pernod-ricard , vin & spirit

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It's easy to see why Fortune Brands would reach for a drink, what with sales in its largest division, home and hardware, getting hammered by the trouble in the U.S. housing market. The more so when the drink in question is top-selling Absolut Vodka, the big prize in the auction of Vin & Spirit AB by the Swedish government.  To add more impetus Fortune had an edge in the bidding--and presumably a larger stake in the outcome--in the form of  Future Brands, the distribution JV that its Beam Global unit set up with Vin & Spirit in 2001 in a $645 million deal.

But for all that, when the bidding got too spirited, Fortune knew when to say when. Hence yesterday's news that  Pernod Ricard SA will be getting Vin & Spirit for  $8.9 billion.

Citing the stiff price, Fortune CEO Bruce Carbonari said in a statement that his company will opt instead for a share buyback. Fortune shares rose 9% yesterday on the news. It will also repurchase the 10% stake the Swedes took in Beam Global when the JV was formed.

Fortune said it expects to continue the distribution agreement  for Absolut, which runs until 2012. What will happen with the JV, which distributes a variety of liquor brands and is 51% owned by Beam, isn't clear from reports. It distributes a variety of liquor brands, including some that compete with Pernod Ricard's. Something for Fortune's SVP for strategy and corporate development, Chris Klein, to work on, perhaps.

For his part, Carbonari was reassuring. "The operational consequences of the privatization of V&S are very manageable, starting with significant protections in our spirits distribution joint ventures," he said in the statement. V&S and Beam Global are also linked in the Maxxium international distribution joint venture, which they own with two other partners, Remy Cointreau and the Edrington Group. The Maxxium agreements provide "certain protections to the partners that help ensure an orderly transition in the event of a change in control of a partner," the statement noted. - Kenneth Klee



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