Jack Daniel’s is one of the biggest whiskey brands on the planet. The Tennessee-crafted spirit has been served at bars and restaurants the world over for 142 years, and remains to this day one of the most in-demand liquors. It’s a drink that’s almost as recognizable as Coca-Cola, which coincidentally go quite well together.
Brown-Forman, JD’s owner and the purveyor of several other spirits, is a publicly traded company. The company dates back as far as the creation of Jack Daniel’s, though they only acquired the famous whiskey in the mid ’50s. While you can buy stock in Brown-Forman (under $BF.A and $BF.B), the majority of the company is controlled by the remaining Brown-Forman family.
Now, Constellation Brands ($STZ), a New York-based beer, wine, and spirits company, is in talks to buy Brown-Forman. In a time where major alcohol companies constantly pull off mergers and acquisitions, Constellation’s proposed buy of Brown-Forman makes sense to shareholders. Yet the Brown-Forman families aren’t rushing to give up their lifetime supply of Jack Daniel’s so quickly.
Constellation Brands is the third-largest major beer supplier in the U.S.
Dwarfed only by Miller-Coors and AB InBev, Constellation brands sells hundreds of beer, wine, and spirits brands, many of which are imported. For instance, Corona, Modelo, and Pacifico are all imported and sold by Constellation. The company also owns Svedka Vodka, Robert Mondavi wines, and the disgusting-tasting Arbor Mist.
Constellation wants to grow their liquor business by buying Brown-Forman.
An acquisition of Brown-Forman will let Constellation capitalize on the rise in popularity of whiskey and other brown liquors. It would also let the company diversify their revenue streams, earning them more money by selling more products. This would put the company in billions of dollar worth of corporate debt, but it would eventually (hopefully) pay for itself and then some.
The Brown-Forman family wants more money than was offered.
According to financial analysts at Credit Suisse, Constellation has yet to offer an amount for Brown-Forman that the controlling shareholders deem reasonable. They predict that the family is holding out for a $30 billion buyout, which would put Constellation even further in debt than the $9 billion they currently owe. Chances are Constellation offered significantly less than this during acquisition talks.
Should you invest in Brown-Forman or Constellation Brands?
Brown-Forman’s stock is currently up 1.59% as of this writing. Though the stock performed well recently, shareholders are excited about any possible acquisition, as it would likely mean that their current shares would be worth more in the future. Constellation’s stock, however, is currently down 1.33%. Though the acquisition would bring in an approximate $3 billion each year in extra revenue, it would put the company in considerable debt and would only pay off after a certain number of years.
If you think Brown-Forman will eventually be acquired, you will want to do thorough research before you consider investing in the company. If you think either company will continue to prosper since the consumption of alcohol isn’t dying down any time soon, you could invest in them or similar companies in the spirits space. If investing in liquor doesn’t sit well with you, or if either of these companies rubs you the wrong way, simply invest elsewhere.