The heirs of the Jack Daniel’s fortune are caught in a significant family dispute, with two brothers expressing their discontent just as a $15 billion hostile takeover attempt is on the horizon for the well-known whiskey brand.
W.L. Lyons Brown III and his brother Stuart Brown recently sent a seven-page letter to over 130 members of the Brown family, criticizing the Brown-Forman board, which owns Jack Daniel’s. They claim the company has been “rewarding failure,” particularly since shares have dropped nearly 60% in recent times.
“The numbers are stark and undeniable,” the brothers stated in their letter dated July 10, as reported by the Wall Street Journal.
They highlighted that the stock price of Brown-Forman has plummeted from the mid-$70s to the mid-$20s per share over the last three years, leading to a loss of billions in generational wealth for the Brown family and other investors.
The top officials at Brown-Forman, a company with 156 years of history that produces both Jack Daniel’s and Woodford Reserve, are now facing an unsolicited cash offer of $15 billion from Sazerac, a competitor that produces Buffalo Trace bourbon.
As the company struggles with stagnant sales, CEO Lawson Whiting is reportedly preparing to leave, while the Brown family, whose collective wealth Forbes estimates at around $11 billion, continues to squabble over the future direction of their business.
At the forefront of this family drama is Lyons Brown, 66, who was previously pressured to leave Brown-Forman in 2002 after a disagreement with his uncle, who was then the CEO. He has a history of challenging the norm, famously flipping an organizational chart upside down during a meeting to encourage new ideas.
After his departure, Lyons started his own liquor business and co-founded a now-defunct venture focused on eco-friendly beekeeping.
In his remarks to the Journal, he indicated that the content of their letter speaks for itself.
Now, he and Stuart are focusing their criticisms on family members who hold power within Brown-Forman.
The brothers have accused the board and other relatives of not being transparent about failed merger discussions with French liquor giant Pernod Ricard and have questioned why the company was willing to negotiate with them while dismissing Sazerac’s offer.
“If the Pernod Ricard transaction was Plan A, what is Plan B? The Company is in crisis,” they wrote in their letter.
Additionally, they critiqued the strategy surrounding Jack Daniel’s, likening it to Baskin-Robbins due to the numerous flavors being marketed.
Despite the controversies, the Brown descendants, who remain in control of Brown-Forman through more than 70% of the voting Class A shares, are powerful stakeholders. Within the family investment organization Wolf Pen, which was created to consolidate the voting power of the family, about 60% of shares are held. This effectively allows them to block a sale.
Lyons and Stuart Brown opted not to join Wolf Pen, which limits their influence unless they can rally support from other relatives for their cause.
Wolf Pen has previously turned down Sazerac’s takeover bid, stating it didn’t align with their vision for Brown-Forman. The company also conveyed that the offer wasn’t feasible.
Nevertheless, Sazerac made a direct pitch to Brown family shareholders on July 24, claiming their bid offered a 40% premium compared to Brown-Forman’s most recent trading price.
“Our offer remains open, and we feel even more convinced about it,” Sazerac stated.
Following the distribution of the Brown brothers’ letter, Whiting announced that he would resign once a suitable successor is identified.
Amid this turmoil, Brown-Forman faces growing challenges due to diminishing demand for its products. The company reported $3.9 billion in sales during its latest fiscal year, with net income dropping by 18%, as noted in the Journal.
In an effort to stabilize the situation, Marshall Farrer, 55, a fifth-generation member of the family, is attempting to maintain unity among those connected to the company.
The family has a history of promoting values like “long-term growth and independence through the family’s control” and “trust, respect, and diplomatic candor” among its members, values they once printed on Old Forester bottles.
However, that commitment seems to be under strain, reminiscent of the rough edge of a shot of Jack Daniel’s taken without a chaser.
“Sometimes you think of the Southern company that’s very nice and generous with each other,” Farrer shared with shareholders in July. “But there’s a lot more toughness going on.”
