The Macdonald family has instructed Rothschilds to issue a document to all potentially interested parties outlining its intention to sell its controlling interest in Glenmorangie plc. The letter not only gives a desired purchase price but asks potential bidders for details over how they would intend to build the existing Glenmorangie brands and guarantee the future of the firm's estate [three distilleries and a bottling plant] and workforce. The express intent is to sell the firm as a complete package with no redundancies rather than see it being broken up.
While it is not known who, if anyone, has entered into negotiations with the Broxburn-based whisky firm, three firms: Diageo, Pernod-Ricard and Wm. Grant would all be likely to fall foul of competition authorities given their strong positions in the malt whisky category.
Diageo: can't buy because of its dominant position in whisky.
Pernod-Ricard: probably can't due to being No1 player globally in malt.
Grants: probably can't due to Glenfiddich being No1.
It would be a great fit for Edrington, but the downside is that buying it would be a complete reversal of current strategy. In the past 18 months Edrington has disposed of Langs, Glengoyne, Black Bottle and Bunnahabhain and has been actively looking for a buyer for Glenturret. The strategy (perhaps driven by Maxxium) has been to concentrate on a small portfolio: Grouse, Macallan and, to a lesser extent, Highland Park. Having Ardbeg and Glenmorangie would scupper that. Glen Moray wouldn't fit, neither would the own-label business or the bottling hall.
A bid from Allied would attract interest from monopolies and mergers and you must ask whether they would really want it? They have mothballed distilleries already, they sold Ardbeg because it was surplus to requirements.
While it would be a good fit and show that the firm is serious about the malt category there's a lot which doesn't quite add up. Also, could they guarantee the estate would remain intact -- one of the specifications in the letter? If there was cherry-picking after the purchase they may well be sniffing around though.
Bacardi: Have distribution, have dipped their toe in the water as far as whisky is concerned with Dewar's but not made the jump to malt. A perfect fit, but after Grey Goose have they the cash? The fact there was such a categorical denial means they must be thinking about it!
Brown-Forman: The front runner for many. The 10% equity, shares, seat on the board, distribution rights. It seems a done deal until you remember that they were also front-runners for Dewar's but pulled out at the last minute. They'll table a bid but might prefer to sit tight and play a back seat role.
Angostura: Can never be discounted. Have declared that they are actively seeking more acquisitions and are already in the whisky category. That said they have not any front-line brands. This would give them instant market share, bottling capabilities and the estate would stay intact. Lack of distribution network may count against them.
LVMH: The most intriguing. Have now finally parted company with Diageo - post Seagram and now post Schiefflin & Somerset and are known to be in acquisitive mood.
Like the other three potential buyers this would be a good fit and complete their luxury portfolio with serious brands. A good each-way bet. What would happen to the own-label business? It would be dropped.
Whyte & Mackay. No cash.
MBO? Is it possible? I wonder. Think about why the family is selling at this point. One reason why the family is selling is because they think the share price won't get any higher and that Neep's strategy of low-margin/high-turnover, while effective in the short to medium-term, is no way to build a long-term future for premium brands. In other words, it is on a sound financial footing at the moment, but a strategy of deep discounting is a dangerous way to buy long-term market share.
And what happens to the SMWS? Makes that seem like the vanity purchase it always was.