Blog: Chris Brook-CarterWaiting game

Chris Brook-Carter | 5 May 2005

It was all fighting talk from Pierre Pringuet this week as the joint managing director of Pernod Ricard tried to convince the market that his French company remained cool and confident in regards to the Allied Domecq takeover.
 
However, that he should again feel the need to publicly declare his confidence speaks volumes of the uncertainty  that now characterises this battle for the likes of Courvoisier, Maker’s Mark and Mumm Champagne.
 
“I don't see how they can put together an offer as attractive as ours,” Pringuet said yesterday of the  potential rival bids.
 
Pernod was no doubt prepared for some competition in its bid to buy Allied. After all, this is one of the last  great prizes on offer in the consolidating spirits market.

However, the arrival of Diageo to the party has cast a long, dark and unwelcome shadow over Pernod’s proceedings.
 
A bid by the Constellation consortium alone seems  unlikely to trouble Pernod too much, as the four companies  involved will be able to generate fewer cost cuts than the  French group. Also, both Brown-Forman and Constellation have a smaller presence in European markets than Pernod.

“We can generate a lot of synergies,” Pringuet said yesterday.“We will double in size but obviously we will  not double our structure.”

However, should Diageo help finance the Constellation bid in return for brands it sees as attractive, as the  Observer reported this weekend, then the financial tables will turn if not full circle then at least enough to cause  an expensive bidding war.
 
“Constellation and its allies have a better chance of winning Allied with Diageo on board, as it provides the  consortium with the financial muscle it badly needs,” one analyst was reported as saying.

The key is likely to lie with the competition  authorities. “I don’t see how they can take a big chunk of  Allied because of the antitrust concerns,” Pringuet said.

If that is true, Pernod should be home and dry. But if Diageo CEO Paul Walsh can find a way round the maze of  competition problems, then life could get more difficult for Pernod yet.


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