The $15 Billion Whiskey War No One's Talking About

0:00Sazirac is owned by a powerful whiskey family that has brands like Buffalo Tracing about 500 others And they've offered $15 billion to buy Brown Foreman, which is controlled by another powerful whiskey family And this murder would create one company that controls about 30% of the US whiskey market The Brown family said no, but now there's evidence of an internal family feud. Will Brown Foreman be sold? If you want to hear about it, then stick around So before we hop into it, some disclaimers as of 9.6 when this is recorded No deal has been struck also I got a lot of this information from public sources and journalists Some of their information was from confidential sources so there's no way to independently verify it So let's talk about who the players are. So Brown Foreman is the parent company that owns brands like Jack Daniels, Woodford Reserve, Old Forester, Hero Dura, they own Scotch brands, they have other tequila brands, Run Brands, Gin, Liquor, they're huge

1:09They were originally formed in 1870 by George Garvin Brown and his claim to fame was he sold whiskey and sealed bottles So if you remember from some other videos back then it was common for like a CVS type store like an apothecary to get a whole barrel And then you'd bring your bottle in and fill it up but sometimes they would adulterate the whiskey to try and make the barrel last longer And Mr. Brown came along and said don't have to worry about that, you can trust the quality of my whiskey And that brand has grown to about 3.9 billion in fiscal year and sales in 2026 So whenever you're looking at Brown Foreman numbers sometimes it gets a little bit confusing because their year end is at the end of April So their 26 is already over even though we're not at the end of the year Now they are a publicly traded company and they have two classes of shares, they have A shares which have voting power And they have B shares which don't have voting power and the Brown family controls an estimated 70% of the A shares

2:09So with that control they control all major decisions including any decisions to merge or to be acquired by somebody else Now Sazrack Corporation, they own brands like Buffalo Trace, their other big winner was Fireball But they own about 500 other brands and they're owned by the Gold Ring family which purchased them in 1948 The parent company Sazrack started in like 1850 but they got control in 1948 And unlike Brown Foreman they are privately held a company so they don't have the public disclosures For me to get real detailed information about their business but Reuters has estimated that they do about 6 billion dollars annually in sales Now Perno Recar, that company they own brands like Jamison, Chivas, Glen Levit, Absolute Vodka, Malbe Rum They have Gens, they have Konyaks, they have Champaign Houses and they're the second largest producer of wine and spirits in the world

3:09And they were founded in 1975 and they are a publicly traded company in Europe And they generate between 11 and 12.5 billion in annual sales over the last few years They operate in 160 countries The Recar family owns about 14% of their voting shares However, through strategic alliances they control about 21% of the votes So the relationship that they have with all of these institutions basically gives them control over all major decisions Because if all of the other shares that are outstanding kind of combined together they wouldn't be able to outvote the Recar family And the relationships that they have So why did these two companies start trying to buy Brown Forman? Well, Brown Forman became a target because they have had declining income So in 2024 they made just over a billion dollars in that profit 25, 869 million and 26, 715 which sounds pretty good

4:14Except for that's not an alignment with what Wall Street thought they were going to make And that resulted in their stock price falling about 60% in the last five years So in my estimation I think that the stock price was overinflated from COVID error assumptions And that's something that Wall Street does and we're going to talk about that a little bit more But if a large conglomerate like Pernot or Sazirac could acquire a company like Brown Forman There's a lot of opportunity for them to combine the two companies and make the overall company much more profitable And they can do that by reducing overhead So if you have warehouses in the same area you can co-locate inventory and maybe get rid of the warehouse You don't need as many forklifts, you don't need as many forklifts drivers You probably don't need two CFOs, right? All that stuff can be eliminated But the other thing that gets people excited is what they call synergy Right? And so if you're really good at selling your products in the international markets over here

5:20And then you acquire a company that's really good at selling their products in the domestic market over here Then you might be able to sell your international products in the United States And you might be able to sell the US products in the foreign markets better if you combine the two companies And that's ultimately what synergy is and that's what makes them attractive to some of these large companies It's going to be a reoccurring thing that we talk about But I don't think ultra premium whiskey brands should be owned by publicly traded companies Unless there is a decision structure From individuals that understand the industry Because Wall Street is pretty bad at understanding the factors that will play into long-term success And Wall Street is pretty bad at being lenient with financial decisions today that may not pay off for years to come And so that's part of what made this interesting And it's part of why I believe the Brown family Has looked at these two offers that we're about to talk about differently So in March of 26 per no and Brown announced that they were going to talk about potentially merging

6:27And Reuters reported that the deal was about 80% stock and 20% cash and that's important Because the Brown family probably doesn't need a lot of money and they spend 155 years building up their families namesake of Brown Forman And they would like us seat at the table And so with this 80% stock purchase they would have significant influence in the new company after the merger But Sazrex all the same thing that Pernod did and on April 9th they made an announcement that they were offering $32 per share Which would put their offer at about 15 billion dollars to buy all of Brown Forman Now $32 15 billion dollars on a company that made 715 million last year is 21 times earnings And if you know anything about valuations that sounds kind of high But if you understand the synergy and the cost cutting that these large corporations believe that they can engage in

7:29It's not that crazy and they were trying to make a deal so sweet that the Brown family and the other stockholders would just say hey This is great multiple. Let's go ahead and take this to the bank But this was basically a cash deal that would have removed the Browns from the playing field altogether And they just be handing control of their family's namesake over to a competing family from the same industry And as you could imagine at their 155 years of building it they probably have some internal family to traditions that say hey Don't sell out to another competing family Hey nice hat. Hey, thanks nice landard nice rocks class Thanks man nice travel case nice blin topper. Thank you Nice candle nice bottle bag. Thanks man. That's a nice tumbler Nice woman's t-shirt. Oh, thanks nice extra shmidium shirt Get yourself some nice things and get all the compliments that come along with it

8:34shopburbonwheeltalk.com So The other thing to consider is that yes, it was a cash deal, but it was going to be financed with debt and with that debt service come some risk Right because you do have this higher operating cost after you merge two companies together So you got to cut other things they're going to cover that and you have to find those synergies to be able to cover that So if you're the brown foreman and you're looking at this you're like hey, this could damage my family's namesake Look at what happened to r&c We already talked about that They wanted to go out and buy young so that they could expand their footprint because they thought there was going to be You know cost-cutting measures and synergies that they were going to be able to bring to the table and those synergies never happened But the debt service cost did and it ended up driving What was otherwise a healthy company into bankruptcy? And so if you're the brown foreman your brown family you're probably like I'm a little bit nervous about them financing that so that's another factor that plays into it

9:37But the reports did say that the browns preferred the perno deal And so they were pursuing that But I think that Some of the reasons that they thought that was a better deal is they were going to maintain influence And then they believed that there was going to be a larger synergy opportunity with perno because of their international relationships Then they were going to be able to get with Sazrack which is also large in all the same markets that brown foreman is But on April 20th Perno and Brown announced that there was going to be no deal They couldn't they couldn't find common ground so at that point you got Sazrack standing there with the giant polycash saying hey What do you think brown family? Why don't you sell the Sazrack? Let's see what we can do And and they realized you know there were some things that the brown foreman A company was looking for and the brown family specifically was looking for to make them feel comfortable with this deal So in May they tried to sweeten the deal and they said if you have class A stock

10:41We're going to allow you to roll that into ownership into the Sazrack company But because Sazrack is a privately held company if you own 5% and somebody else owns 95% of a privately held company And they want to do something that you don't want to do you don't have any influence And so it wasn't just about the ownership They did want to see it at the table But they needed some governance protections to make sure that they were going to have some influence over major decisions And apparently the deal did include some of That I'm guessing they probably had the choice of a handful of board members or something like that And they also offered them higher dividends Which would have increased their potential cash payouts in the future because the brown family Brown family currently lives off dividends from their stocks. So They wouldn't necessarily just be handing control over to another family that have a seat at the table And this was kind of meant to reconcile the pros and cons between the two deals

11:41But despite all that on May 12th the brown foreman board rejected the offer And it's interesting because on that date their stock price ended at 2656 Which is a significant variance from the 32 dollars that the stockholders would have gotten And this is an indication that Wall Street never thought this deal was going to work Because they would have kept bidding that price up close to that 32 dollars knowing That if you bought the stock for 30 today and then the deal goes through and you sell it for 32 You make two dollars per share and it doesn't cost you anything But they didn't think the deal was going to go through so the stock price never made it up over that 2656 So This deal may have been great for the shareholders at 21x But it wasn't what the family was looking for because Caching out is not the family's main concern But this created a family feud and that's where this story gets kind of sensational and exciting There's about 130 brown foreman family members That control the voting shares for the corporation and Forbes estimates that collectively their fortunes worth about 10

12:46$0.7 billion dollars and two of the family members got together and released a seven page memorandum to the other 130 Famine members and said hey guys We need to wake up because our company is in crisis Um, I don't really agree with the strategy that leadership is implementing I think that the executive compensation packages are Too high and we're paying people too much money to produce bad results And I don't think that we had a large enough voice in these merger negotiations And so you got two family members that are trying to persuade the rest of the family members who ultimately have the power to make the decision Let's go back to the table and let's reconsider whether or not we're doing the right things here Now what's interesting about that is three days after that memorandum got released to the family members the CEO resigned Now he didn't just quit he said ham to stay in place until we find somebody else um, and there's no formal announcement that the letters what caused them to resign

13:48But given the family who controls the voting shares who have the ability to vote people onto the board that would fire him We're expressing concerns about his performance It kind of seems like the two might be related, but there's no formal announcement of that So Now Sazarek realizes we have to appeal directly to the brown form the brown family So they start reaching out to the brown family and seeing if we can get you know some people to come to the table Influence the brown form and board of directors to consider this proposal more seriously But on July the 26th the brown form and board formally rejected the proposal So for now both deals are off the table. So what does this mean for the future? Well uh the brown family is gonna have to like whatever deals on the table where it's not gonna happen right But even if the the browns love the deal We still have to get over the ftc's review of the merger and that could be a pretty big deal right

14:50um and and we've seen in the past that when brown form and does it's it's um It's quarterly statements and releases the required documentation they have to because they're publicly traded They've admitted in the past that the family's interest are not always in alignment with the stockholders interest And so that's a kind of an interesting thing But on the other hand if you are feeling too bad for the stockholders The only reason the company got where it is is because of the brown families leadership And when you bought that stock you knew you weren't gonna be over to overpower Their leadership decisions and so you know you can't you can't be you can't be too upset about that But as we mentioned ftc's involved after this merger we'd have about 13% of the spirits industry in the united states being controlled by one company And 30% of the us whiskey market would be controlled by one company and I don't think the ftc's gonna rubber stamp that and When you look at the reporting on this issue

15:50It seems as if sazerak would need to sell some of its assets To even make this deal possible for the ftc to approve But if sazerak's got to sell off properties to be able to do this merger It actually starts to erode at the benefits and the reason that they wanted the merger to begin with And so you know, I'm I'm not sure what the future is going to hold But We have to keep it in consideration that the economics of this situation could change right Brown formant is looking for a new CEO profits have been declining We know that there are headwinds that they're facing in the alcohol industry everybody's facing it And there has been a public crack in the unity of the brown family And so if profits continue to decline Um the value of the company could go down even further It could sweeten the deal from sazerak it could make it look a little bit better

16:50Maybe perno comes back with another offer or they keep their same offer But the company's worth less and people more likely to agree to it or who knows maybe another intran will jump in the fight and say hey I would like to Uh put my my name in the hat too and see if I can I can buy brown formant Now if you're a consumer you're probably thinking well like what does this have to do with me Am I still going to be able to get my my jack Daniels and what I'll say about that is it doesn't matter what happens in the situation I don't think there's going to be many changes to production right you know One thing to consider is that the next six to 12 years worth of products already been distilled and it's aging in barrels right And so We're not going to see any changes anytime soon and you don't pay 15 billion dollars for a property to destroy it immediately But making changes willy nilly But what is most likely to change is their their cost structure and their distribution structure And I have I have seen in the past whenever these types of change happen It does disrupt the flow of product into markets and that could

17:55Could have an impact on consumers But in the long run they're going to figure out how to get the product on the shelves You're going to be able to find it and so I don't think there's going to be a huge consumer impact So in conclusion I think Wall Street's terrible at valuing whiskey properties I don't think they properly interpret the relationship between revenue and whiskey inventory Um, I think that they have a tendency to put too much emphasis on short-term trends and assume that it's going to go on forever Because Wall Street is so short-sighted. They only look about 90 days out great example of that is MGP MGP was doing great They were selling all of their high-age stock. They were making plenty of profits And Wall Street assumed that was going to go on forever without ever looking at their inventory to see whether or not They could maintain those sales and when they ran out of that high-age inventory Their sales fall off fell off a cliff and their stock price plummeted and Wall Street acted like it was a big surprise And so I think that it's better that large whiskey properties Like Buffalo Trace

18:57Like some of the scotch companies like Jack Daniels are controlled by Individuals in the the market that have the history to understand what the investment cycle and the capital cycle looks like for a successful brand and It doesn't matter which way this went It looked like Brown Foreman was going to still be in a really good position to make those types of decisions so um Despite this internal family feud though I don't think that they're likely to sell to another family like the gold rings I just think it's they don't need the money that bad and I don't think that they want to give up control um After their family spend 150 years building up the brand right um And so the other thing is they're not going to get any pressure from the other stockholders because Even if they all coalesce together against the Brown family, they still can't outvote them um And so you know that could change if for whatever reason

20:00Um the stock price continued to decline you could have some of the Brown family members that see a brighter future in the merger And they don't want to deal with the trust in headaches anymore. Who knows um But even if they did we still have to make sure that the FTC doesn't kill the deal Which is very possible. So hopefully you enjoyed this content If you want to support the channel there's three easy ways the easiest is patreon Everyone's names that are on the screen right now are contributing at the top three levels But don't worry there is a level for all budgets and so uh go check that out. There's a lot of benefits We do a monthly virtual bottle share have a lot of funds some so we do trips go check that out And then if you don't want to do that that's fine go check out the merch at bourbonroll talk.com. We have Merchardis made by whiskey people for whiskey people much of it is customizable and if you happen to have a following or brand We will actually partner with you and set up a custom website for you to get your logo on our Merchandis So you can check that out as well But the main way I make my money isn't through whiskey

21:03It's through residential real estate now operating the Dallas Houston and Austin metro areas So if you need service in any of those markets, I'd love to hear from you And there's links for all three ways to support the channel in the video description on youtube So if you're watching this Don't want you to get it twisted. Yes, we love whiskey. Yes. We love whiskey education But we're mostly about community and connection and that's because I lost the love on the suicide in 2014 And I started looking for ways to help people form those kinds of connections and their life That keep you bound to this world and I saw how whiskey was a great conduit to bring people together to form those kinds of connections And so I started this channel and my hope is that I can get you connected to whiskey whiskey would do the rest of the job and get you connected to others But if you want connection you do have to have a forum for people to interact with each other and A lot of them were filled with negativity from people we call whiskey trolls that run everybody's fun And so we had to start our own forum that was troll-free and we did it's called bourbon-mildtock community

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