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Friday, 18 August, 2000, 15:48 GMT 16:48 UK
Drinks firms mix for takeover bid
Pints of Guinness
Guinness may be joined by Captain Morgan in the Diageo portfolio
The distiller of Smirnoff vodka and Johnnie Walker whisky is teaming up with the manufacturer of Pernod to bid for Seagram's $7bn drinks empire.

The UK's Diageo, the world's largest wine beer and spirits business, on Friday announced it had agreed with French-owned Pernod Ricard to mount a joint bid for Seagram's spirits arm, owner of brands such as Captain Morgan rum, Chivas Regal whisky and Martell cognac.

Seagram, a Canadian-based firm which also owns Universal Studios and Universal Music, has put the brands up for sale to allow it to concentrate on its entertainment business. The firm is currently in merger talks with French utilities and media group Vivendi.

The sale offers Diageo an opportunity to pursue its strategy of growth through takeover, the firm's chief executive Paul Walsh said.

Bidding race

"Seagram's business is of great interest to us and would be a logical extension to our focus on beverage alcohol, which we plan to expand organically and by acquisition," Mr Walsh said.

Friday's news leaves the way open for a bidding race between the Diageo/Pernod consortium and Allied Domecq, the world's second ranking alcoholic drinks firm, which had been favourite to scoop the deal.

Seagram's spirits business, valued at about $7bn, represents a good fit for Allied, with little market crossover between the firms' brands, analysts believe.

But the sum Allied needs to fund the purchase might overstretch the company, which owns Beefeater gin, Tia Maria and Ballantine whisky, observers say.

Cash rich

Diageo, which is proposing to float its Burger King subsidiary and sell its Pillsbury food company, would be more easily able to fund the Seagram purchase.

The Diageo/Pernod bid would, if successful, see Seagram's main brands split 50:50 between the two distillers, with smaller divisions sold off.

"Our main interest is in the Scottish whisky category, to add to our Clan Campbell and Aberlour brands," Richard Burrows, Pernod's joint managing director for UK and Ireland said.

By early afternoon, shares in Diageo had declined 16.5p to 594.5p in London. Allied shares had fallen 7.25p at 319p.

In Paris, Pernod shares has risen 2.5% to 60 euros.

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See also:

17 Jul 00 | Business
Diageo confirms Pillsbury sale
04 Jul 00 | Business
Rum row turns sour
22 Jun 00 | Business
Burger King to float
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