Anecdotal reports indicate that Elliott Management founder Paul Singer likes the occasional drink. Either that or he likes dancing around in fountains wearing feather headdresses stone-cold sober, although in our experience such activities rarely occur without some social lubrication, no matter how excited Singer was to see Italy prevail over France on penalty kicks.
What Paul Singer does not like are drinks companies that are not doing as well as he thinks they should be.
The hedge fund said Pernod has lost market share across various segments, including vodka, gin and some types of whisky, and has “significant room for improvement.” While its sales have grown steadily for years, margin growth has stagnated, leaving Pernod’s operating margins 5 percentage points below those of rival Diageo PLC, the fund said.
Elliott will press Pernod to set more ambitious targets for cutting costs by centralizing more functions and raising revenue to improve margins, while adding new talent from the outside, according to a person familiar with the matter.
That’s pretty unambitious as far as Paul Singer asks go, but Pernod still doesn’t seem inclined to play along, protected as it is by the Ricard family’s overweight voting interest and its status as a French national treasure akin to the Venus de Milo.
Given the family’s influence and the importance of its name to the Pernod brand, the hedge fund needs its cooperation. Antitrust issues and likely pushback from the French government over a sale of Pernod—one of the country’s best-known companies—would make a sale difficult….
Mr. Ricard indicated he doesn’t agree with Elliott’s assessment. He noted that Pernod’s share price has risen nearly 38% over the past three years, outperforming French and European indexes, and that the company in that period has added three directors to its board, giving it a range of experience.
That said, we expect the Chivas to flow freely at the Elliott holiday party, although we confess to some disappointment that New York City’s outdoor fountains have been turned off for the winter.