British drinks group Diageo is in talks to sell its Malibu coconut rum to France's Pernod Ricard in a deal which would smooth the passage of the two groups' takeover of Seagram, industry sources said yesterday.

Diageo is seeking to sell Malibu to overcome the concerns of US regulators, and is looking for £600-£650 million pounds sterling (€965-€1,045 million) - although some sources believe £700 million is possible.

Talks with Pernod are at an early stage, but the French group is clearly the early favourite to clinch a deal after working closely with Diageo over the last 13 months on the Anglo-French bid for Seagram's wines and spirits empire.

Other interested parties include the two largest US spirits groups - Jim Beam bourbon maker, Fortune Brands, and Jack Daniel's maker, Brown-Forman. Diageo's chief rival in the global spirits world, Allied Domecq, is seen as an unlikely buyer.

"A deal with Pernod would be the neatest for Diageo, and Pernod would like to gain a rum in the United States if it can come up with the financing and get approval from the US regulators," one source said.

Bacardi is by far the top-selling rum brand in the US, followed by Seagram's dark rum, Captain Morgan, Diageo's coconut rum, Malibu, and Seagram's Myers.

Diageo's earlier offer to sell Myers was not acceptable to the FTC.