Sazerac is paying 5.55 euros per share to acquire Germany's Berentzen Group, a premium that complicates the usual logic for European expansion. The case for the deal rests on manufacturing flexibility, but the risk is that the 68% premium to the three-month weighted average price signals a high cost for entry in a challenging market.
The agreement prices Berentzen at approximately $6.31 per share. This figure represents a 68% increase over the company's three-month weighted average price prior to September 16. Sazerac will delist Berentzen from the Frankfurt Stock Exchange upon closing. The transaction is subject to shareholder approval and is expected to close at the end of the year.
Berentzen Group operates in more than 60 countries and holds brands including Berentzen schnapps and Puschkin vodka. The company also owns several nonalcoholic beverage and juice brands. Sazerac CEO Jake Wenz stated that the partnership allows the Buffalo Trace maker to broaden its capabilities in Europe. He cited the ability to manufacture and distribute its own spirits products with greater flexibility and pace.
The counterargument is that Sazerac is paying a significant premium to solve a distribution problem that might be addressed through organic growth or cheaper partnerships. The line to watch is whether the added scale justifies the 68% premium in a sector facing headwinds. Oliver Schwegmann and Ralf Bruehoefner, members of the Berentzen Group's Executive Board, argued that the combination presents an excellent opportunity to pursue its growth strategy. They noted that value creation at this pace is only possible with a strong strategic partner in a challenging European market.
This is the second European deal Sazerac has charted within the past year. Last month, the company bought U.K.-based canned cocktail brand Au Vodka. Over the past decade, Sazerac has also acquired U.K.-based Last Drop Distillers and Hawk's Rock Distillery in Ireland. The bulk of Sazerac's recent M&A activity has taken place in the U.S., targeting brands of interest to younger consumers. These include RTD brand Dirty Shirley and stakes in Kendall Jenner's 818 Tequila and Alix Earle's Sipmargs. The spirits maker has also bought a group of whiskey facilities in Kentucky.
On balance, the deal is a bet on infrastructure over brand acquisition. Sazerac is buying a 250-year-old producer's network rather than a new label. The read-through is that Sazerac values the ability to move its own products through established European channels. The deal broadens Berentzen's existing portfolio and capabilities while boosting investments at its existing sites. The acquisition fits a pattern of aggressive expansion through M&A as the company looks to grow despite a challenging market for alcohol producers.