Activist hedge fund firm Elliott Management has taken a stake in the company behind Jameson Irish whiskey and Absolut vodka.
Elliott disclosed on Wednesday that it had taken a more than 2.5 percent stake in French spirits company Pernod Ricard. In a statement announcing the investment, the activist firm pushed for the addition of independent directors and more rigorous cost-cutting measures.
“In Elliott’s view, Pernod possesses an outstanding portfolio of leading international spirits brands and offers one of the most attractive investment opportunities in the industry, with significant potential for improvement,” the hedge fund firm said in the statement.
The firm claimed that Pernod is currently underperforming its peers, including Diageo, a British brand that owns Smirnoff and Baileys. According to the statement from Elliott, Pernod’s operating margin is at a five-percentage-point discount to Diageo. Elliott also described Pernod’s track record for mergers and acquisitions as “disappointing.”
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“Elliott’s analysis further suggests that an environment of inadequate corporate governance and a lack of outside perspectives have contributed to this underperformance,” the statement continued.
Pernod Ricard’s board, which has a total of 14 members, includes at least four members of the Ricard family, the firm’s website shows.
Alexandre Ricard, the firm’s chief executive officer and grandson of founder Paul Ricard, highlighted the company’s “strong family values” as well as its commitment to an independent board of directors in a statement released by the company on Wednesday.
According to Pernod’s statement, the liquor company has added three new directors to its board in the past three years.
Pernod Ricard also responded to Elliott’s concerns about its performance, noting that it is in the process of implementing a strategic plan that has helped sales and profits grow at a faster rate year-over-year. Sales grew by 6 percent in the last fiscal year, up from 3.6 percent growth in the prior year, while profits improved by 6.3 percent, up from 3 percent growth.
Elliott has met with Ricard and written to the Pernod Ricard board to share its recommendations to improve shareholder value, including “launching a more ambitious operational improvement plan to close the profitability gap with competitors and aligning corporate governance with best-in-class peers,” according to the hedge fund firm’s statement.
A spokesperson from Elliott declined further comment. A spokesperson from Pernod Ricard could not immediately be reached for comment.