Diageo has said it expects to issue a benchmark US-dollar global bond, subject to market conditions, and to this end has had discussions with the credit rating agencies.

Approximately US$900m of Diageo's current debt will mature between May and August 2005 and the company views current market conditions as a favourable opportunity to pre-fund some of this maturing debt before it enters its closed period, the company said. Diageo's closed period commences in July and ends with the announcement of the preliminary results in September 2005.

The company added that it noted that the the pace of consolidation activity in the total beverage alcohol sector is increasing - with the offer by Pernod Ricard for Allied Domecq as the latest example.

"In this environment, Diageo expects to continue to evaluate opportunities to make acquisitions that complement its existing premium drinks brands and create shareholder value. The funding options for potential acquisitions include the use of the group's substantial free cash flow, the possible monetization of the remaining shares in General Mills and borrowings. In limited circumstances, Diageo is prepared to change its targeted range of financial ratios for a period of time provided that those new ratios are broadly consistent with a credit rating in the single A band," a statement said.