French drinks group Pernod Ricard announced plans for a €1 billion ($1.35 billion) rights issue today along with the sale of its Wild Turkey bourbon brand to Italy's Campari for $575 million as it seeks to cut debt.
Pernod took on debt with its acquisition of Absolut vodka maker Vin & Sprit AB from Sweden in July last year and needed to dispose of some brands to meet European Comission competition requirements.
Analyst Francis Pretre at CM-CIC said that Pernod had more than €11 billion in net debt and now had the means to refinance 65 per cent of its long-term debt.
But the shares were down 4.5 per cent at €42.50 at 7.59am, off an initial fall of 8 per cent as the market waited to get the terms of the rights offer.
"The capital increase is an unpleasant surprise. Expect the share price to take a hit at least today. Pernod wants to use this raised cash to finance a 3BE maturing bond in 2011," a Paris-based share dealer said.
"We had expected a convertible bond issue. The only positive aspect to this rights issue is that they won't need refinancing for a long time," the dealer added.
Pernod shares have fallen 16 per cent this year and were down 33 per cent in 2008, closing on Tuesday with a market capitalisation of €9.6 billion.
Pernod, the world's second-biggest drinks group behind Diageo, said that with the sale of Wild Turkey it has now completed nearly 60 per cent of a disposal programme announced in July.
Campari said today the cash purchase was equivalent to 12 times expected earnings before interest, tax, depreciation and amortisation (EBITDA) in the first 12 months following the deal's closing, expected before June 30th.
Pernod said the transaction includes the Wild Turkey brands, along with American Honey liqueur, distillery facilities in Kentucky and related assets including stocks of aged bourbon.
Reuters