Pernod CEO to drive change after 'constructive' Elliott talks

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LONDON (Reuters) – Pernod Ricard will embrace change and continue “constructive” talks with activist investor Elliott Management, CEO Alexandre Ricard said on Tuesday while dismissing speculation that the company could become a takeover target.

Pernod CEO to drive change after 'constructive' Elliott talks

FILE PHOTO: Alexandre Ricard, Chairman and Chief Executive Officer of French drinks maker Pernod Ricard, poses at the company headquarters in Paris, February 12, 2015. REUTERS/Christian Hartmann/File Photo

The world’s second-biggest spirits group behind Diageo is under pressure from New York hedge fund Elliott Management to improve profit margins and corporate governance.

Last week Pernod vowed to lift its margins and shareholder returns in a three-year strategic plan that Elliott described as a first small step.

CEO Ricard, the grandson of the French drinks group’s founder, said he welcomed Elliott’s perspective.

“We met in January. We will continue to have an open dialogue with Elliott in the coming weeks or months, as we do with other shareholders,” he told Reuters.

A spokeswoman for the fund declined to comment on Tuesday.

Ricard said talks with Elliott centered around governance and margin improvement, adding that Pernod is a consolidator rather than a takeover target.

“I hope there will be no surprise if I reiterate very clearly and specifically — Pernod Ricard is here, Pernod Ricard is here to stay and Pernod Ricard is and will remain a consolidator.”

Elliott’s arrival has raised speculation of potential dealmaking. A source close to the matter told Reuters in December that Elliott had suggested options such as merging with another spirits company.

Ricard declined to comment on the likelihood that Elliott would seek a seat on the board of the maker of Absolut vodka and Martell cognac.

Pernod shares were down 1.3 percent at 1609 GMT.

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Its 46-year-old CEO, who once worked as an M&A consultant at U.S. bank Morgan Stanley and appeared bare-chested at his desk in an internal promotional video last year, acknowledged that change is necessary for success.

“The mandate I think I’ve been given is quite clear. It’s to consistently and ruthlessly pursue value creation over time,” Ricard said.

“If you want a company to succeed and stay over time, that company needs to transform itself permanently. Consumers change over time, the environment changes, the dynamic changes — if you don’t keep transforming yourself, it’s not going to happen.”

He declined to say whether having Elliott as a shareholder helped him to push the message on the need for change within the company or what governance initiatives might be in the pipeline.

Reporting by Martinne Geller; Editing by David Goodman