- Roth Capital said a significant premium was needed to acquire the family-controlled business.
- TD Cowen noted the family's roughly 67% stake and track record of rebuffing past acquisition attempts.
- Stocktwits sentiment shifted to 'extremely bullish' from ‘neutral’ a day ago.
Shares of Brown-Forman (BF.B) rose nearly 10% on Thursday and extended gains in after-hours trading, after the American whiskey producer confirmed it was in talks with French spirits maker Pernod Ricard regarding a potential merger.
The maker of Jack Daniel's said in a Thursday statement that the deal would be akin to a “merger of equals” and that the parties have not yet agreed on the terms.
Why Analysts Doubt Brown-Forman, Pernod Ricard M&A
Roth Capital on Thursday maintained a ‘buy’ rating on Brown-Forman shares and said that the company is undervalued and the probability of a deal is “hard to assign”. The firm added that a significant premium would be required for the deal, citing the family-controlled business as a difficult and unlikely target.
TD Cowen said that Brown-Forman is an “unlikely seller”, noting the family’s about 67% stake and its past records of rebuffing acquisition attempts. However, it noted that the company “may be more receptive than they have been in the past” due to industry declines and the logic of a merger as growth slows. The firm rates Brown-Forman a ‘hold’ with a $30 price target.
Brown-Forman Faces ‘Challenging Operating Environment’
Earlier this month, the company reported that its net sales for the nine months of the fiscal year fell 2% to $3 billion, from a year earlier. It said U.S. net sales declined 8%, driven by the end of its decades-old sales partnership with Korbel Champagne Cellars, lower volumes of its Jack Daniel’s Tennessee Whiskey, and the absence of a transition services agreement with Sonoma‑Cutrer Vineyards.
President and CEO Lawson Whiting said that Brown-Forman was navigating a “challenging operating environment” and expects low visibility for the year amid macroeconomic and geopolitical volatility, headwinds from consumer uncertainty, and lower non-branded sales of used barrels. Brown-Forman said it expects full-year organic sales and operating income to decline in the low single digits, maintaining prior guidance.
What Do Retail Traders Think Of Brown-Forman?
Stocktwits sentiment on Brown-Forman has shifted to 'extremely bullish' from ‘neutral’ a day ago, and message volumes jumped to ‘extremely high’ from ‘high’— even as the stock sits roughly 1% lower year-to-date.
One bullish user said, “$BF.A, $BF.B I doubt this will happen. Controlling family would demand a huge premium from these depressed levels, one I don’t think Pernod can swing. Long-term bullish regardless.”
Earlier this month, another added “$BF.A this brand has value and stock is trading like they’re worthless.”
For updates and corrections, email newsroom[at]stocktwits[dot]com.
Read Next: Why Did NEXT Stock Jump Over 2% In After-Hours Trading Today?