Shares in Pernod Ricard rebounded after the French distiller said it is eyeing a combination with Jack Daniel’s maker Brown-Forman, a tie-up that could create a global booze giant with a combined market capitalization of some $30.38 billion.

Paris-listed shares in the maker of Absolut vodka had initially fallen Thursday after Bloomberg reported the company had held talks with its Kentucky-based peer, closing 5.7% lower at 59.94 euros. But investors changed their minds after the two companies separately confirmed the talks overnight.

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“If agreed… this partnership would be akin to a merger of equals, drawing from the talent and expertise of both companies, and creating value for shareholders of both companies,” the French group said in a release.

Pernod shares were up 3.3% at 61.90 euros in European morning trading Friday.

The merger, coming at a time when the drinks industry is becalmed, would offer savings for investment to get some momentum into struggling sales, Jefferies analyst Edward Mundy told clients in a note.

“We see significant merit in a merger between the Kentucky Gentlemen and the French,” Mundy said.

The spirits sector is grappling with lower demand for alcohol, particularly in the U.S. and China. Coupled with declining sales, the sector is also contending with a tough regulatory environment marked by tariffs.

The Wall Street Journal reported that a possible deal could be weeks away, citing people familiar with the matter. The agreement being considered includes a significant stock component, and the families behind the two companies would likely each retain significant stakes in any deal, the people said.

Alexandre Ricard is Chair and Chief Executive at Pernod, while the Brown family has around 67% voting control of the U.S. group.

The companies said that operational synergies would be significant, pointing to Brown-Forman’s portfolio of brands—which alongside star label Jack Daniel’s includes Diplomatico rum and Chambord raspberry liqueur— and Pernod Ricard’s global distribution strength and exposure to emerging markets.

The parties noted that there can be no assurance that any agreement will be reached.

Write to Andrea Figueras at andrea.figueras@wsj.com

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