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Investment Firms Push Back on Elliott Management’s Pernod Ricard Campaign
Shareholders J. Stern & Co. and Groupe Bruxelles Lambert are voicing their support for the French spirits company.
Investment firms J. Stern & Co. and Groupe Bruxelles Lambert are pushing back against Elliott Management Corp.’s activist campaign targeting French spirits company Pernod Ricard.
The two shareholders are voicing their support for Pernod Ricard following Elliott’s announcement this week that it owns a more than 2.5 percent stake in the company. The hedge fund firm, founded by president Paul Singer, is agitating for change.
“It is tiresome to hear activists push good companies to do more of what they are doing all along,” said Christopher Rossbach, chief investment officer of J. Stern, in an emailed statement Thursday. GBL, which says on its website that it owns about 7.5 percent of Pernod Ricard, echoed his confidence in the company's current strategy.
GBL "fully supports the family values of Pernod Ricard based on long-term value creation,” a spokesman for the investment firm said in an emailed statement Thursday. The spirts company's strategic plan, as well as its share price, reinforce its faith in its investment, he said.
Elliott is pushing for Pernod Ricard, which owns the Jameson Irish whiskey and Absolut vodka brands, to add independent directors to its board and to engage in more rigorous cost-cutting measures.
According to Elliott, Pernod has been underperforming its peers, particularly Diageo, the British brand that owns Smirnoff and Baileys. Elliott said in its announcement that Pernod’s operating margin is at a five-percentage-point discount to Diageo, its closest peer.
But J. Stern likes what the company has delivered so far.
“Pernod has generated total returns of 9 percent per year over the past ten years, 14 percent per year over the past twenty years, and 12 percent per year over the past twenty-five years,” Rossbach claimed in his statement. “That is a strong record of value creation for long-term shareholders like us.”
Rossbach compared Elliott’s campaign to Third Point’s activist campaign against Nestle, which launched in 2017. J. Stern also holds a stake in Nestle.
"Third Point has been 'demanding’ that Nestle grow faster, control its costs and allocate its capital more efficiently, all things that Nestle’s management has a strong record of doing for decades,” Rossbach said. “Elliott’s demands of Pernod Ricard are the same.”
[II Deep Dive: Elliott Takes Activist Stake in Liquor Company Pernod Ricard]
He added that J. Stern held a stake in both companies “long before Third Point or Elliott showed up” and that the firm will stay invested in both for a long time after they divest.
A spokesperson for Elliott did not respond to an email seeking comment. A spokesperson for Pernod Ricard declined to comment.