WHO WILL WIN THE ABSOLUT PRIZE?
As the time to acquire Vin & Sprit approaches, the industry is even more a’buzz with who will wine the ensuing bidding war. UBS analysts Melissa Earlam and Kaumil Gajrawala released a report today that examines the impact of the V&S acquisition on its various bidders and the industry as a whole. Let’s take a look at what they had to say.
1. Kaumil and Melissa predict V&S will most likely be sold at the beginning of 2008, although it could go for sale as early as the end of 2007.
2. UBS values V&S at a whopping $6.7 billion (€4.7bn).
3. In order of likely success, they rank industry buyers in the following order: Fortune Brands, Pernod, Bacardi and Diageo.
FORTUNE. UBS considers Fortune the most natural owner of V&S for several reasons, which can basically be summed up with the following: Future Brands, Maxxium and Beam Global.
As you’ll recall, Future Brands is a US distribution joint-venture between Fortune and V&S, while Maxxium is an international j-v between Remy Cointreau, V&S, Beam Global and The Edrington Group. Absolut already makes up 21% of the volume in Future Brands and 22% of the volume in Maxxium. Futhermore, V&S owns a 10% stake in Beam Global.
Clearly, Fortune has the most to lose if it does not succeed in acquiring V&S. Not only would it lose a major brand in the US (Absolut), but “unwinding the existing relationship between the two companies would be complex and time-consuming.”
“[Fortune] management is confident that it can achieve the financing of such a deal. We believe that if financing were to become a stretch, a third party, such as Anheuser-Busch, could potentially enter the fray as a minority financing partner.”
PERNOD. Meanwhile, UBS says it would rather see Pernod acquire Stolichnaya, believing it would add more value to the company than Absolut. Here’s why.
On the good side, Absolut would give Pernod increased exposure to premium vodka and increased scale in the US market. However, UBS believes the deal would “release significant cost synergies given Pernod’s global distribution scale.”
“The Stolichnaya brand would cost Pernod less than V&S, offers higher growth and greater international upside.”
BACARDI. As a private company, we’ve heard very little from Bacardi concerning its interest in V&S, but most industry players consider Bacardi a strong contender in the race for Absolut. UBS points out anti-trust issues could pose a problem for the Bermuda-based company, particularly in the US. Futhermore, if Bacardi acquires Absolut it could possibly have too much vodka.
“We raise the possibility of anti-trust in the US with Grey Goose and Absolut having combined 47% share of the import vodka segment, as well as whether the V&S acquisition would expose Bacardi too much to vodka (combined would be 40% of spirits volumes) with an investment of almost US$9bn in one category since 2004.”
DIAGEO. Diageo is viewed as the least likely bidder due to a little brand called Smirnoff. Most industry insiders, including UBS, believe Diageo would face far too many anti-trust issues if it attempts to acquire Absolut.
“We see Diageo as the least likely buyer due to anti-trust reasons with its vodka portfolio (most notably Smirnoff) not only in the US (where a price segmentation approach could resolve market share issues), but importantly also in Canada, Greece, Spain, UK, Mexico and Israel.”
Paul Walsh of Diageo told Reuters last month that the company is interested in purchasing Absolut and believes it has anti-trust solutions.
“We can see solutions in all jurisdictions but the complexity will vary from market to market,” he said.
Paul has also commented that while the company is “very interested in Absolut,” it is not a “must have” acquisition.
1. Kaumil and Melissa predict V&S will most likely be sold at the beginning of 2008, although it could go for sale as early as the end of 2007.
2. UBS values V&S at a whopping $6.7 billion (€4.7bn).
3. In order of likely success, they rank industry buyers in the following order: Fortune Brands, Pernod, Bacardi and Diageo.
FORTUNE. UBS considers Fortune the most natural owner of V&S for several reasons, which can basically be summed up with the following: Future Brands, Maxxium and Beam Global.
As you’ll recall, Future Brands is a US distribution joint-venture between Fortune and V&S, while Maxxium is an international j-v between Remy Cointreau, V&S, Beam Global and The Edrington Group. Absolut already makes up 21% of the volume in Future Brands and 22% of the volume in Maxxium. Futhermore, V&S owns a 10% stake in Beam Global.
Clearly, Fortune has the most to lose if it does not succeed in acquiring V&S. Not only would it lose a major brand in the US (Absolut), but “unwinding the existing relationship between the two companies would be complex and time-consuming.”
“[Fortune] management is confident that it can achieve the financing of such a deal. We believe that if financing were to become a stretch, a third party, such as Anheuser-Busch, could potentially enter the fray as a minority financing partner.”
PERNOD. Meanwhile, UBS says it would rather see Pernod acquire Stolichnaya, believing it would add more value to the company than Absolut. Here’s why.
On the good side, Absolut would give Pernod increased exposure to premium vodka and increased scale in the US market. However, UBS believes the deal would “release significant cost synergies given Pernod’s global distribution scale.”
“The Stolichnaya brand would cost Pernod less than V&S, offers higher growth and greater international upside.”
BACARDI. As a private company, we’ve heard very little from Bacardi concerning its interest in V&S, but most industry players consider Bacardi a strong contender in the race for Absolut. UBS points out anti-trust issues could pose a problem for the Bermuda-based company, particularly in the US. Futhermore, if Bacardi acquires Absolut it could possibly have too much vodka.
“We raise the possibility of anti-trust in the US with Grey Goose and Absolut having combined 47% share of the import vodka segment, as well as whether the V&S acquisition would expose Bacardi too much to vodka (combined would be 40% of spirits volumes) with an investment of almost US$9bn in one category since 2004.”
DIAGEO. Diageo is viewed as the least likely bidder due to a little brand called Smirnoff. Most industry insiders, including UBS, believe Diageo would face far too many anti-trust issues if it attempts to acquire Absolut.
“We see Diageo as the least likely buyer due to anti-trust reasons with its vodka portfolio (most notably Smirnoff) not only in the US (where a price segmentation approach could resolve market share issues), but importantly also in Canada, Greece, Spain, UK, Mexico and Israel.”
Paul Walsh of Diageo told Reuters last month that the company is interested in purchasing Absolut and believes it has anti-trust solutions.
“We can see solutions in all jurisdictions but the complexity will vary from market to market,” he said.
Paul has also commented that while the company is “very interested in Absolut,” it is not a “must have” acquisition.
posted at 10:14 AM
<< Home