- Constellation Brands, whose products include Svedka Vodka and Corona, has tried to acquire Jack Daniels' owner Brown-Forman, according to CNBC. Terms of the offer were not revealed.
- Brown-Forman told the company it was not interested, but informed its board of Constellation Brands’ interest.
- CNBC said there are no ongoing talks, but Constellation remains interested in a potential merger.
In its most recent earnings report, Brown-Forman Corp. saw a 2% decline in sales, but once again saw strong numbers for its Jack Daniel’s family of brands. The fifth-generation company remains an attractive acquisition target because of its well-known products.
A purchase by Constellation would help its expansion into premium liquors. Last year, it purchased High West Distillery — which allows the company to produce more high-end and premium products, particularly in the fast-growing bourbon and rye categories — as well luxury winemaker Prisoner Wine Co. Constellation also has moved into the craft beer space highlighted by its acquisition of American brewery Ballast Point, which it closed for nearly $1 billion in 2015.
Bonnie Herzog, a managing director with Wells Fargo Securities, said while there are scenarios in which a deal with Brown-Forman gets done, she called the move "a bit of a head scratcher." Herzog noted obstacles including Brown-Forman's unwillingness to sell and the fact that a takeover would be dilutive to Constellation Brands' shareholders.
"It’s hard for us to imagine a scenario where the deal gets done," she said. "While we give credit to STZ for attempting a bold move that would have been a strong acquisition (financing/control considerations aside), we can’t say we’re surprised BF’s board apparently rejected the offer. We think the status quo will likely continue."
With Brown-Forman claiming it does not want to sell, Constellation may need to go back and find a smaller company as its next acquisition target. It's no stranger to M&A so it's likely just a short amount of time another deal gets announced.