Allied Domecq, the world's second biggest spirits group, confirmed yesterday that it is in talks to be bought by France's Pernod Ricard, the parent of Irish Distillers, and Fortune Brands, the US homewares-to-spirits group.
The takeover approach underlines the pace of global consolidation in the spirits sector as brand owners seek cost benefits from rationalised distribution and marketing in key markets.
Allied Domecq's shares rose by about 18 per cent in London to close at 633p, leaving the group - which owns Ballantine's whisky, Beefeater gin and Malibu rum - with a market value of just under £7 billion (€10.3 billion). At the close, Allied Domecq had an enterprise value of £8.8 billion.
Equities analysts in London and Paris yesterday welcomed the approach, and speculated that Pernod and Fortune would have to bid about 650p a share to clinch the group.
It is expected that if Allied is sold to Pernod/Fortune, the deal would trigger disposals of Allied assets not considered core to the merged group.
Analysts said the move by Pernod is a logical continuation of the consolidation that has characterised the drinks industry since the ground-breaking merger of Guinness and GrandMet in 1997 to create Diageo. Diageo, the world's biggest distiller, has a portfolio of brands ranging from the truly global, such as Smirnoff vodka and Johnnie Walker whisky, to more local drinks with a more local following.
Pernod's move on Allied is seen as a substantial response to Diageo's bulk.
Unlike the other distillers in the second tier behind Diageo, Allied is unencumbered by family shareholdings. Its fast-food assets - Dunkin' Donuts, Baskin-Robbins and Togo's - have also become growth engines and buying Allied would strengthen Pernod in some key areas.
Malibu, the flavoured rum would be one of the attractions and Allied would also bring the US rights to sell Stolichnaya vodka. It would add Perrier Jouet champagne, Montana Sauvignon Blanc and other wines to Pernod's Jacob's Creek unit.
However, Allied also includes small brands that could clog up Pernod's machine. These "tail brands" had been a deterrent to Bacardi, once seen as another potential bidder.
Should it win Allied, Pernod is unlikely to keep Courvoisier cognac because of potential regulatory issues: it has Martell. Allied has no Irish whiskey brands and the deal is unlikely to have any impact on Irish Distillers which produces the Jameson, Paddy and Powers brands.
This is likely to be one of the brands Fortune is interested in.
It would be a surprise also if Pernod kept the fast-food businesses, which have been seen as suitable candidates for a private-equity backed buyout. - (Financial Times Service)
