UK: Allied front runner for Seagram's spirits

By Chris Brook-Carter | 6 July 2000

Allied Domecq is the front runner to buy Seagram's spirits business if it is sold after the Canadian company's merger with Vivendi, according to a report yesterday by analysts at Deutsche bank.Allied has been at the centre of consolidation rumours since the formation of Diageo two years ago. But despite being openly determined to be part of the second tier of consolidation has failed so far to find a willing partner.The potential sale of Seagram's drinks business however presents a perfect opportunity to make good on its merger intentions.In the report, Deutsche bank highlighted the lack of realistic alternatives to an Allied deal. It claimed that the current circumstances of Allied's rivals placed Allied in pole position.Bacardi, the most likely competitor, suffered the loss of Chip Reid and his management team after the family voted against Reid's proposed IPO, which also dented its potential buying power. And, Brown Forman does not have the size of financial war chest needed to secure such an acquisition.Meanwhile in Europe the list of buyers is Diageo and Pernod Ricard. Diageo would not get regulatory approval and Pernod with a market capitalisation of only£2bn was not in a position to takeover a business worth an estimated £6 billion, the report said.Pernod's prospects of a successful bid for Seagram's spirits took a further blow this week when it discovered it may have to enter a lengthy and expensive legal or bidding battle for the Polish vodkas Wyborowa and Zubrowka. The Polish government cancelled the international rights to the brand owned by Agros, the Pernod subsidiary, handing them instead to the individual distilleries who make the vodkas.Pernod now faces paying in excess of £500m each for brands it already believed it controlled internationally.All this leaves Allied in a healthy position. It has a new management team who are in favour with the City and the disposal of its retail business has left it with cash to spend.

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Allied Domecq is the front runner to buy Seagram's spirits business if it is sold after the Canadian company's merger with Vivendi, according to a report yesterday by analysts at Deutsche bank.Allied has been at the centre of consolidation rumours since the formation of Diageo two years ago. But despite being openly determined to be part of the second tier of consolidation has failed so far to find a willing partner.The potential sale of Seagram's drinks business however presents a perfect opportunity to make good on its merger intentions.In the report, Deutsche bank highlighted the lack of realistic alternatives to an Allied deal. It claimed that the current circumstances of Allied's rivals placed Allied in pole position.Bacardi, the most likely competitor, suffered the loss of Chip Reid and his management team after the family voted against Reid's proposed IPO, which also dented its potential buying power. And, Brown Forman does not have the size of financial war chest needed to secure such an acquisition.Meanwhile in Europe the list of buyers is Diageo and Pernod Ricard. Diageo would not get regulatory approval and Pernod with a market capitalisation of only£2bn was not in a position to takeover a business worth an estimated £6 billion, the report said.Pernod's prospects of a successful bid for Seagram's spirits took a further blow this week when it discovered it may have to enter a lengthy and expensive legal or bidding battle for the Polish vodkas Wyborowa and Zubrowka. The Polish government cancelled the international rights to the brand owned by Agros, the Pernod subsidiary, handing them instead to the individual distilleries who make the vodkas.Pernod now faces paying in excess of £500m each for brands it already believed it controlled internationally.All this leaves Allied in a healthy position. It has a new management team who are in favour with the City and the disposal of its retail business has left it with cash to spend.

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