With the potential merger, Brown-Forman could have a better route to market Jack Daniel's in China and India - where demand for whiskey is rising, given Pernod's wide distribution network, mentioned the report. It would also expand both companies' global reach.

The deal being contemplated would be 80% stock and 20% cash, people familiar with the matter said.

News of the discussions comes amid the pressure which Brown-Forman, like other distillers, has been facing due to a swift drop-off in alcohol consumption, especially among younger adults.

The US spirits market is struggling, with off-premise sales averaging a stagnant 1% quarterly growth over the last three years, as per Bloomberg Intelligence. Amid this slump, Brown-Forman has been hit particularly hard, with its shares plummeting 60% over the past five years.

Why Brown-Forman Corp is in favour of Pernod?

Sources aware of the discussions also told Bloomberg that Brown-Forman Corp sees Pernod as the better fit as the combined company could be diversified across geographies and types of spirits. Additionally, a deal with Pernod would give the 150-year-old family-controlled distiller behind Jack Daniel's a bigger stake in the business and more influence.

The potential tie-up between Brown-Forman-- which has a market cap of about $13.4 billion, and Pernod, which has a market value of about $20 billion - could create a leader in American whiskey, strengthen Pernod's position in tequila and expand both companies' global reach.

Meanwhile, Sazerac plans to submit a $15 billion all-cash offer for Brown-Forman, New York Times had reported on 17 April.

With roots dating back to the 1630s, Sazerac-which makes Buffalo Trace bourbon and Southern Comfort liqueur-is heavily concentrated in the US market. Its whiskey-centric portfolio closely overlaps Brown-Forman's offerings.

While the Brown family maintains control via two-thirds of the company's voting rights, an all-cash bid from Sazerac may appeal to minority shareholders eager to exit the volatile spirits sector. However, a merger would consolidate over 30% of the US whiskey market, which analysts at Barclays Plc say would likely trigger an "extended review" from regulators that may not be warranted under a Pernod combination, reported Bloomberg.

Louisville a key region?

Brown-Forman and Pernod have considered maintaining Louisville, Kentucky, as a key region for the combined entity - as part of the ongoing discussions. However, there is no clarity on whether the city would be the headquarters or just a major hub.

With talks still underway, people aware of the matter have reportedly said there's no guarantee it would result in the sale of Brown-Forman.