The largest US beer importer, New York-based Constellation Brands, is trying to flirt with some of Kentucky’s bourbon royalty—and it doesn’t look to be working out so well.
Constellation this week floated an acquisition proposal to Kentucky-based Brown-Forman—the maker of Woodford Reserve bourbon and Jack Daniel’s (a Tennessee whiskey), according to a report by CNBC. Brown-Forman is one of the largest US producers of alcohol, bringing in more than $3 billion in revenue in 2016. But the proposal, like all previous ones, was met with skepticism by the Brown-Forman family, which holds a controlling stake in the business.
According to an investor report by analysts at Credit Suisse, Brown-Forman’s disinterest in such a big-name merger ultimately boils down to the price. The family has passed the company down through its lineage since 1870, and has consistently turned down past acquisition offers in favor of retaining control.
The business began when then-pharmaceuticals salesman George Garvin Brown started JTS Brown & Bros. with his half-brother. The two pioneered the idea of selling bourbon in sleek glass bottles, as opposed to in barrels, which was the custom of the time. Within the next century, the company changed its name to Brown-Forman, survived the Prohibition era by obtaining a license to make alcohol for medicinal purposes (yes, medicinal booze was a thing), and stayed in the family.
A purchase would make sense for Constellation. The company currently runs Corona and Svedka Vodka. But with brown liquors on the rise and the Mexican beer business decelerating, it’s on the lookout for ways to add something popular to its portfolio.
Brown liquors have been the inspiration behind a few recent deals. Just a year ago Brown-Forman sold Southern Comfort and Fireball to Sazerac Company for $544 million. Sazerac is now reworking the Southern Comfort recipe and marketing it as a premium whiskey. And Constellation has already bought High West, a Utah-based craft whiskey distillery, for $160 million. Adding the popular Jack Daniel’s brand to its list of offerings would be a major boon.
However, Credit Suisse analysts say, Constellation Brands likely hasn’t come close to proposing a deal that would truly tempt the Brown-Forman family to sell. Credit Suisse guesses the right price tag would probably be around $30 billion—but that’s a tough number to meet for Constellation, which is presently about $9 billion in debt. For now, the company may have to continue its dry spell.