France's Pernod Ricard is in talks to buy bigger rival Allied Domecq, the two firms said today.
Pernod, which owns Chivas Regal scotch and Jacob's Creek wine, said it had teamed up with US conglomerate Fortune Brands for a potential deal, confirming months of market and media speculation.
The news sent shares in Allied Domecq 19 per cent higher.
Analysts said Allied - whose brands include Ballantine's whisky, Beefeater gin and Malibu coconut rum - could fetch around £7.2 billion ($13.5 billion), or 650 pence a share, and would help Pernod close the gap on market leader Diageo.
"Discussions with Allied Domecq Plc are at an early stage, and there can be no certainty that an offer for Allied Domecq Plc will ultimately be forthcoming," Pernod said in a brief statement, echoing an earlier announcement from Allied.
Pernod almost bid for Allied in 1999, and the two firms' portfolios are complementary in terms of geography and brands, with the biggest overlap in Spain.
Allied's performance has been transformed since 1999, and some analysts have doubted Pernod's ability to raise the money to buy its larger rival. But the French firm has been rapidly cutting its debt and has a track record of working together with other companies to make a successful bid.