Big maneuvers are being prepared at Pernod Ricard. Nothing will be officially discussed at today’s general meeting. But behind the scenes, the wine and spirits group has entered a phase of capital development. Its CEO, Alexandre Ricard, has been preparing since the start of the school year to step back from second-largest shareholder Groupe Bruxelles Lambert (GBL). The company of the heirs of the financier Albert Frères, owns 7.5% of Pernod. An important ally for the Ricard family, which controls only 13.93% of the family group, and a strong supporter during the Elliott activist fund crackdown in 2018. Together, they hold 33% of the group’s voting rights and so both the blocking minority.
Therefore, any movement of GBL is carefully scrutinized by Pernod Ricard. According to several sources close to the two groups, their bosses have been talking for several months about reducing the GBL in a few years.
A few months ago it was even considered that a small part of the 7.7% of GBL would be bought by Pernod. The goal is to prevent the group’s actions from falling into the wrong hands. Alexandre Ricard has been very cautious since the Elliott bust.
Pernod Ricard “is not a sacred cow”
The bag went from more than 200 euros to 180 euros, allowing everyone to temporize. GBL does not want its shares in Pernod to weigh more than 20% of all its financial assets. But this was the case six months ago when the stock was at an all time high. In the coming weeks, the investment company plans to sell a small part, around 0.5%, through financial instruments. The company assures that “being a long-term shareholder, it has no intention of initiating a process of leaving Pernod Ricard’s capital.” But a year ago, his boss Ian Gallienne told Les Echos that Pernod Ricard was “not a sacred cow”.
The reality is more nuanced. “It will not sell everything but it will reduce its shares,” admits a close associate of the alcoholic group. “The direction is very clear to everyone, adds a close friend of GBL. In times of crisis, you have to have liquidity and take advantage of the high Pernod price to sell a little.” His boss wants to find a balance between recovering funds and maintaining a profitable stake, which has brought him 31 million euros in dividends since the beginning of the year.
Several options are being considered: the sale of a small part in the markets and to Pernod, directly or through the repurchase of shares. The objective is to raise the level of participation of the Ricard family in the capital. However, these operations have their limits. “Pernod cannot spend too much money to buy back GBL shares, says a well-known insider of the group. Otherwise, it would be accused by its minority shareholders of only favoring the Ricard family.” A criticism that Alexandre Ricard, CEO and grandson of the founder, wants to avoid. It was an Elliott angle of attack.
Avoid the dispersion of generations.
The question of GBL’s future is all the more delicate as it comes at a time when the family wants to ensure its continuity at Pernod. According to our information, one of her members sold her shares a few months ago to the other heirs. “This event leads the Ricards to think about how to maintain their weight at Pernod,” explains a source familiar with their discussions. The family grows and has about sixty heirs.
At 50 years old, CEO Alexandre Ricard represents the third generation. Some members of the fourth generation are already thirty years old like his niece Eole Peyron, daughter of the navigator Stéphane Peyron. The objective is to avoid dispersion.
“Some people want to sell their shares, it’s normal, we recognize that at Pernod. But in general, the family is trying to get stronger.” Last year it bought 0.7% of the capital for 230 million euros, justifies the group, although this occurred two years after the sale of 2% of Pernod.
The Textbook Case of Hermès
The Ricard family wants to maintain control of the group that bears their name. It is considering anticipating these stock sales to better finance them. The Paul Ricard company has preferential subscription rights over the shares of the heirs. But if an entire branch wants to sell everything, the others will not have the means to finance its acquisition.
“The Ricards are thinking of structuring a mechanism to anticipate the sale of shares within their family, explains a person well acquainted with the Pernod group. It could resemble an internal stock market.”
The Ricards closely follow what the Hermès family did ten years ago to protect their shares in the luxury group. The capital was then fragmented with about sixty heirs, which had led LVMH to launch its offensive. The Ricards also want to protect themselves against an attack. During Elliott’s offense, Bernard Arnault’s shadow hung over Pernod Ricard.
Source: BFM TV
