Brown-Forman CEO: Sale rumor created too much 'noise' to ignore
Last month’s blip of speculation about a takeover offer for Louisville-based Brown-Forman Corp. was too distracting for the company to ignore, CEO Paul Varga said Wednesday.
LOUISVILLE, Ky. (WDRB) – Last month’s blip of speculation about a takeover offer for Louisville-based Brown-Forman Corp. was too distracting for the company to ignore, CEO Paul Varga said Wednesday.
On May 24, Brown-Forman issued a statement saying the family-controlled company is “not for sale” after its stock spiked the day before on rumors of interest from rival Constellation Brands.
The company’s comment was unusual as Brown-Forman has a long-standing policy of not saying anything about market rumors, which the company even reiterated in its May 24 statement.
But on a conference call with stock analysts Wednesday, Brown-Forman CEO Paul Varga explained why the company decided to enter the speculative fray last month.
The Constellation rumor created so much “noise in the marketplace” that “the way it was affecting our stakeholders, our employees” and the soaring trading volumes for company stock necessitated a response, Varga said.
“There is an art to saying something without saying anything,” Varga said Wednesday. “…The interesting thing is, all we said is something we’ve said many, many, many times before, just against a backdrop where you had all that noise. In my view, it was well-timed and said enough.”
Brown-Forman’s Class B common shares slid nearly 4 percent Wednesday after the company reported earnings that were slightly lower than expected.
Brown-Forman’s earnings in the three months ended April 30 fell 71 percent from the same period in 2016, but the company said last year’s results were skewed by the sale of its Southern Comfort and Tuaca brands to Sazerac Co., which resulted in a gain of $485 million.
The liquor maker’s net sales and operating profit growth for the fiscal year ended April 30 were below historical levels for the last ten years, executives said Wednesday.
Varga said the company plans to improve performance and is looking for this summer’s launch of a rye whiskey under the Jack Daniels brand to help.
“Everybody here at Brown-Forman feels pretty good about the way we are entering this fiscal year and the next several years,” he said.