Tuesday, May 23, 2017

"Whisky Dividends Anyone?" Constellation Brands Made An Offer to Buy the Jack Daniel's Distiller Brown-Forman (BFA; BFB)

The stock is down $0.60 (-1.05%) at $56.32. UPDATE: Make that $54.69 down $2.23 (-3.92%) That dividend idea is looking better by the minute.
From CNBC:
Constellation Brands made offer to buy Jack Daniel's owner Brown-Forman
  • Constellation Brands has made an approach to acquire Jack Daniels' owner Brown-Forman
  • The Brown family owns a majority of the voting power and has indicated historically that they do not want to sell their company
Constellation Brands, the owner of Corona and Svedka Vodka, has made an approach to acquire Jack Daniel's owner Brown-Forman, people with knowledge of the matter said.

Brown-Forman said it was not interested in selling, but informed the board of Constellation Brands' interest, said the people, who asked not to be named discussing private information.

Terms of any potential offer could not be learned, but Brown-Forman's market cap is hovering around $22 billion. There are no ongoing talks, one of the people said. But Constellation remains interested in a potential merger.

The Brown family, who are fifth-generation owners of Brown-Forman, own a majority of the voting power and have indicated historically that they do not want to sell their company....MORE
Yesterday the stock was the #1 gainer in the S&P 500 and Barron's Ben Levisohn was as puzzled as I:
The Hot Stock: Brown-Forman Flies 7.5%
...I wish I could tell you what's going on, but I have no clue. All I can offer is this chart, which shows you strong Brown-Forman has been this month:... 
I checked Modern Drunkard for comment but saw nothing. However we can guess what their reaction will be, they want nothing to change. When Brown-Forman lowered the alcohol content of their flagship booze Modern Drunkard accused them of watering the whisky.

Jack Daniel’s: A Legacy Betrayed 
"Jack Daniel’s Old No. 7 is a simple reminder that some things just never change. And shouldn’t. This is the old-time whiskey made as our fathers made it. Remaining true to Jack Daniel’s original recipe and charcoal-mellowed character means folks today enjoy the same sipping whiskey awarded seven international gold medals."
So says Jack’s Daniel’s web site. Rather inspiring, isn’t it? Such noble sentiments should warm the cockles of the most cynical drunkard’s heart.

Unfortunately, not a word of it is true. For the second time since the Brown-Forman Corporation acquired the distillery in 1956, they have lowered the proof of Jack Daniel’s Black Label Tennessee Whiskey. Fifteen years ago they dropped its original 90 proof to 86, and very recently, and might I say with zero fanfare, they degraded it to 80 proof.

Alert drunkard Chris Sharp brought this unfathomable blasphemy to my attention and I feel it my sworn duty to bring it to yours.

“I was outraged,” says Sharp, a once avid Jack drinker. “They continue to claim in their ads that they stick to tradition. Tradition, my ass. If they think that people will take this sitting down they are sadly mistaken.”...MORE
Oh, and the whisky divi idea?
A repost from 2013:

"Whisky Dividends Anyone?" 
From Global Financial Data (we are fans):
In 1933, a precedent was set for paying whisky as a dividend on common stock.  As I have discussed in an earlier blog, entitled The Famous Whiskey Dividend, companies can invent creative ways to pay out dividends.  In fact, when the going gets tough, the tough go drinking.

After Prohibition was repealed in 1933, National Distillers Products Corporation distributed a dividend of one case of whiskey for each five shares that were owned. This pulled out the stops with paying dividends.  Twenty years later, Park & Tilford provided a more sobering saga.

Originally founded in 1840, Park & Tilford had a long history of being a family-owned operation run by the Schulte’s.  For decades, the company produced a broad line of whiskey and related products until it formally incorporated in 1923 in order to list on the NYSE.

In 1943, in the middle of World War II, whiskey was scarce.  Most companies that produced whiskey had their factories diverted to manufacturing more important goods – in the opinion of some folks – making whisky a hot product to the public.  Since Park & Tilford owned a drug store in New York and went public during prohibition; the company diversified into cosmetics, perfumes and other drug sundries.  Though Prohibition had been repealed in 1933, the diversion of resources to the production of war materiel had some people worried that Prohibition was being reintroduced de facto if not de jure.

On December 15, 1943, D.A. Schulte, the President of Park & Tilford announced that the company was contemplating a distribution of whiskey to its shareholders.    The announcement by Schulte had its effect.  Based on these rumors, the stock advanced roughly 40 points over the next five months, as new shareholders tried to get access to scarce whisky to sell on the black market.  This advance was an aggressive move in any market....MORE 
Another oddball dividend story last seen in Living La Vida Cocoa: Warren Buffett, Berkshire Hathaway and the Chocolate Wars (BRK.A; BRK.B; CBY; KFT; HSY):

...*Copied out of the 1988 Annual Report for our November 2007 post "How Buffett Made a Killing in Chocolate, And Warren's Letters to Shareholders":

Warren on arbitrage:

Some offbeat opportunities occasionally arise in the
arbitrage field. I participated in one of these when I was
24 and working in New York for Graham-Newman Corp.
Rockwood & Co., a Brooklyn based chocolate products
of limited profitability, had adopted LIFO
valuation in 1941 when cocoa was selling for
50 cents per

In 1954 a temporary shortage of cocoa caused the price to
soar to over 60 cents. Consequently Rockwood wished to
unload its valuable inventory - quickly, before the price
dropped. But if the cocoa had simply been sold off, the
company would have owed close to a 50% tax on the proceeds.

The 1954 Tax Code came to the rescue....MORE