French wine and spirits maker PERNOD RICARD S/ADR (OTC: PDRDY) has been bulking itself in a bid to grow, buckling under pressure from activist investor Elliott Management.
Pernod Ricard announced Thursday it has signed an agreement to buy all outstanding shares of Castle Brands Inc (NYSE: ROX), the maker of Jefferson's bourbon whiskey, for $1.27 per share or $223 million in cash, plus the assumption of debt.
The per share offer price represented a 92% premium to the 67 cents at which Castle Brands shares closed Wednesday.
The proposed acquisition is made through a cash tender offer followed by a merger and is expected to close in the fourth quarter.
Why It's Important
Pernod Ricard has been under pressure from Elliott Management to narrow its profitability gap with bigger rival Diageo plc (NYSE: DEO) ever since the latter picked up a 2.5% stake in the beverage maker in December 2018.
"Through this acquisition we welcome this great brand portfolio, in particular, Jefferson's bourbon whiskey, to the Pernod Ricard family. Bourbon is a key category in the US which is our single most important market," said Alexandre Ricard, CEO of Pernod Ricard. "As with our American whiskies Smooth Ambler, Rabbit Hole and TX, we would provide Jefferson's a strong route to market and secure its long-term development, while remaining true to its authentic and innovative character."
Pernod Ricard also announced a $150 million investment in setting up a distillery in the Emei mountains in Sichuan province of China. The investment is seen as prudent, as China is the second largest market for the company after the U.S.
Incidentally in early August, the company agreed to buy Texas-based Firestone & Robertson Distilling Co, which makes TX brand of whiskey.
Castle Brands shares were soaring 90.66% to $1.27 in Thursday's pre-market session.
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