A bidding war for Allied Domecq looks more likely after Constellation Brands confirmed yesterday that it has approached the Bristol-based spirits company about launching a bid to rival that of Pernod Ricard.

Allied's share price was then given another boost by reports in the UK press this morning that Diageo and Bacardi were in talks about jointly funding another bid.

Constellation Brands said in a statement yesterday that its consortium consists of Constellation Brands, Brown-Forman Corporation, Lion Capital (formerly Hicks Muse Europe) and Blackstone.

"There is no certainty whether this preliminary approach will lead to an offer for Allied Domecq. A further announcement will be made as, and when, appropriate," a statement said.

Brown-Forman also issued a statement to similar effect, saying: "Brown-Forman said there can be no assurances that an offer will be made by the consortium or that a transaction will result from this preliminary approach."

That a rival bid is on the cards has surprised few industry watchers given the size of the deal on offer, however analysts have already questioned whether the Constellation-led bid can compete with Pernod Ricard's offer.

"Ian Shackleton, analyst at Lehman Brothers, told the Daily Telegraph: "The question is whether this consortium can access the same synergies that Pernod sees in the deal.''

Pernod has said it can foresee making annual cost savings of about €300m.

Industry commentators have speculated that Constellation's offer may be all in cash, in order to try and trump Pernod's offer, which consists of 80% cash and 20% equity.

"An all-cash offer may be more attractive to UK shareholders reluctant to hold an equity stake in a French company," the Financial Times speculated.

Meanwhile, a story in The Times today added more fuel to the fire by reporting that Diageo has entered urgent talks with Bacardi with a view to forming a consortium to enter the bidding for Allied Domecq.

The Times said observers expressed surprise at Diageo's mooted entry into the bidding, because however Diageo played it, the company would struggle to get a deal past US and European regulators.

However the report quoted one source saying: "At worst, it could force one of its closest rivals to overpay. But if it does manage to get a deal past the regulators, it will find itself in a peerless position."

For its part, Pernod Ricard has remained calm throughout. The company described itself as "serene and confident" in its takeover offer today to Dow Jones newswire.

A spokesman was quoted saying: "We are confident that our offer is the good offer.
"Our offer is good for the shareholders of Pernod Ricard and Allied Domecq and for the future of Allied Domecq's brands," he added.