Pernod Ricard and Brown-Forman End Merger Talks After Governance Disputes

Pernod Ricard and Brown-Forman ended talks over a possible merger after failing to agree on terms both sides considered acceptable, closing a process that had drawn attention across the global spirits industry because of the scale of the two companies and the reach a combination would have created.

The decision was confirmed Tuesday by the French group, which said negotiations concluded without an agreement and that both companies chose to end discussions by mutual consent. Brown-Forman, maker of Jack Daniel's, disclosed in March that it had been in talks with Pernod Ricard as part of its regular review of strategic opportunities. At the time, the U.S. company said any transaction would likely be structured as a "merger of equals," while cautioning there was no certainty a deal would be reached.

The collapse of the talks removes what analysts said could have created a stronger rival to Diageo, the world's largest spirits group. A combined company also would have strengthened its position in the United States, where Brown-Forman has a strong foothold through Jack Daniel's and other whiskey and tequila brands.

Brown-Forman shares fell nearly 6% in premarket trading Wednesday after news of the breakdown in negotiations. J.P. Morgan downgraded the stock to underweight from neutral and cut its price target to $23 from $27. Before the market opened, shares traded at $26.33.

Pernod Ricard said in an internal statement that it would remain focused on its strategy and operating model. The French company added that it remains confident in its roadmap and in its teams, which it said are central to delivering sustainable long-term value for shareholders and other stakeholders.

The proposed transaction had been closely watched not only because of its potential size but also because of the implications for corporate control. Pernod Ricard has long been tied to the Ricard family, while Brown-Forman remains under a shareholder structure dominated by the founding Brown family. Industry sources said that difference complicated discussions from the beginning because any agreement needed to address not only valuation but also governance of the combined group.

In France, the Ricard family retains a significant stake through Concert Paul Ricard. In the United States, the Brown family controls Brown-Forman's voting shares through a dual-class share structure. That setup made it difficult to design a merger that preserved a balance between both family interests without significantly diluting the influence of one side.

Analysts had said a transaction financed largely through shares was the most likely structure given Pernod Ricard's limited room to take on additional debt. But that approach would also have created challenges for the Ricard family because it would have reduced its relative ownership in the merged company. Another issue was the double voting rights attached to certain Pernod Ricard shares held for at least 10 years, a mechanism that could have helped preserve family influence after a merger.

Brown-Forman did not comment publicly on whether it will continue exploring other strategic options. Reuters reported this week that Sazerac Company, maker of Fireball, had submitted an offer of about $15 billion for Brown-Forman and remains viewed as a possible buyer. Still, several analysts see a transaction with the family-controlled company as less likely.

The breakdown comes as the spirits industry faces pressure from shifting consumer habits, higher costs and a more competitive environment in key markets including the United States and Europe. Pernod Ricard has recently emphasized geographic expansion, operational efficiency and strengthening premium brands, while Brown-Forman has been working to sustain growth beyond its core Jack Daniel's business.