Allied Domecq has told the European Commission that the proposed £24 billion sterling merger of Guinness and Grand Metropolitan would create a company with too much power in markets in Ireland, Spain, Britain and Benelux countries. Allied Domecq, together with the Pernod Ricard-owned Irish Distillers and the Canadian group Seagrams, has objected to the Guinness-GrandMet merger to create GMG Brands, but there is growing speculation that Guinness and GrandMet will give the EU sufficient concessions to allow the merger to go ahead in a modified form.

The sale of Guinness' Dewar's brand of scotch is seen as one likely concessions to the EU. This could also involve the sale of spirits brand and other assets by Guinness and GrandMet. In Guinness's case, it will intensify speculation that its 49.6 per cent stake in Cantrell & Cochrane may be sold, especially as its partner in the Irish soft and alcoholic drinks group is Allied Domecq, which has 50.4 per cent of C&C.

The EU must decide whether the merger can go ahead, in whole or in part, by October 27th, but could issue a decision by October 15th.