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Allied Domecq PLC Offer For Bodegas y Bebidas, S.A.


On September 7, the British spirits and wine group Allied Domecq PLC filed with the Spanish Stock Exchange Commission, a recommended conditional cash offer for the entire issued share capital of Bodegas y Bebidas S.A., a market leading Spanish wine producer. The equity of Bodegas y Bebidas is valued at Euro279.2m, equivalent to Euro 15.7 per share of Bodegas y Bebidas, a premium of 30.8 per cent to the closing price on the day prior to this announcement. Bodegas y Bebidas has a number of significant "Denominacion de Origen" (D.O.) interests. The company produces wine from nine D.O.s and has more than 160 brands (of which 80 are D.O. wines), including Campo Viejo, Siglo and Vina Alcorta, three of Spain's leading brands. Bodegas y Bebidas is the largest exporter of quality Spanish wine and has sales in over 60 countries. Bodegas y Bebidas sold some 6.4 million cases of wine in Spain in the year to December 2000, in addition to export volumes of 1.3 million cases. Premium and D.O. wines now account for 70-75 per cent of sales. Allied's current Spanish wine business, Bodegas Domecq, is based in Rioja. There are two key brands: Marques de Arienzo and Vina Eguia. The acquisition will be funded from Allied's existing debt facilities. It should be earnings enhancing in the first full year of ownership (before the amortisation of goodwill). The acquisition of Bodegas y Bebidas is in line with Allied's stated intent of building its global premium wine capability. Allied claims that the acquisition should achieve synergies comprising cost savings and revenue benefits as the business is integrated with Bodegas Domecq. According to Allied Domecq , there should be mutual benefit: Allied's brands of Marques de Arienzo and Vina Eguia would benefit from access to Bodegas y Bebidas' domestic wine distribution network while Bodegas y Bebidas' export business would gain from Allied's international distribution capabilities. Allied claims that savings of Euro2m will be achieved in the first full year of operations and that this number will rise in subsequent years. The one-off cost of achieving these benefits is expected to be around Euro6m. In the year to December 31, 2000, Bodegas y Bebidas generated profits before tax of Euro20.6m on revenues of Euro 202.5m (EBIT and EBITDA before extraordinaries of Euro21.6m and Euro28.1m respectively). As of December 31, 2000, the company had net assets of Euro134.1m and net debt balances of Euro57.5m.

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