A cautionary example might be the Bronfmans, who built their fortune in Canadian whisky during Prohibition. Their Seagram Co. remained one of the world’s largest owners of alcoholic-beverage lines into the 1990’s. But an ill-fated pivot into the entertainment industry overseen by Edgar Bronfman Jr., from the third generation of owners, ultimately led to a breakup and sale, with the beverage division going to Pernod Ricard and Diageo in 2000.
Now, Pernod Ricard itself is being targeted by activist Elliott Management Corp., which is pressing for cost cuts and overhauling corporate governance. The hedge fund’s involvement has prompted some analysts to speculate that Pernod could fall prey to a joint bid from Diageo and billionaire Bernard Arnault’s LVMH Moet Hennessy Louis Vuitton SE.
That couldn’t be further from the truth, said CEO Ricard.
“Pernod Ricard is an independent company and an industry consolidator,” he said, noting how critical the family’s long-term, consumer-driven approach has been to the firm’s growth and current market value of $48 billion.
Still, the $5.1 billion valuation tequila maker Patron fetched when Bacardi bought it at the start of last year underscores the financial firepower required to compete in the industry. The world’s largest privately owned spirits company loaded up on $3.5 billion of debt to pay for the deal, which resulted in a credit downgrade from ratings agency Moody’s.
The Bermuda-based company now has annual revenue of about $4.1 billion after adding Patron to a collection of brands that also includes Grey Goose vodka, Bombay Sapphire gin and Martini vermouth. The family’s holdings are worth about $19 billion, according to calculations by the Bloomberg Billionaires Index. Bacardi is a frequent subject of speculation that it may pursue an initial public offering.
“They have some of the biggest brands in the world,” said Duncan Fox, a Bloomberg Intelligence analyst in London. “There would be plenty of demand if they ever went public.”
The family has shown little appetite for an IPO and its ability to raise financing for the Patron deal suggests there’s no pressing need. The company isn’t planning to cut its dividend despite the extra debt load, Moody’s said.
The clan is similarly averse to publicity despite its wealth and storied past, which stretches back to 1862, when Don Facundo Bacardí Massó — the great-great-grandfather of the current chairman — bought a Cuban distillery and created a smoother, lighter rum that proved a hit with locals. One of his sons supported the first Cuban war of independence and smuggled arms for the rebels.
Almost a century later, the family’s early support for another revolutionary regime backfired after Fidel Castro’s government confiscated their assets. Jose Bosch — who married Facundo’s granddaughter and had been Cuba’s finance minister before running the company — continued operations from outside the country, and the family spent decades plotting to overthrow Castro, according to author Tom Gjelten’s “Bacardi and the Long Fight for Cuba.”