One word surfaced several times this weekend in reports covering the Allied Domecq bid race - Diageo. Two different papers said on Sunday (1 May) that the drinks giant is actively sniffing around for a piece of the Bristol-based drinks company.

Citing analysts, the Observer said yesterday that Diageo is set to support the counter-bid for Allied by Constellation and Brown-Forman. Diageo chief executive Paul Walsh wants to be certain that the US companies are prepared to carry through their threat to trump Pernod's 670 pence a share offer for Allied, the paper said.

If the consortium pushes ahead, Walsh is prepared to offer not only moral support but financial backing in the hope of securing control of some of Allied's brands, including Courvoisier brandy, Maker's Mark bourbon and a handful of wine labels, the newspaper said.

The Sunday Times also mentioned Diageo, saying that Walsh is still considering other options to Pernod's cash and share offer and competition issues.

The paper advises investors to sit tight. One banker was quoted by the paper, saying: "Pernod's bid has made the rest of the drinks industry behave like mastodons on heat."

Constellation and Brown-Forman are now conducting due diligence before making a final decision on whether to table a formal offer for Allied.