Constellation to spark Allied Domecq bid war

Related tags Allied domecq Pernod ricard

The battle for Allied Domecq looks set to begin with news that
Constellation Brands, the world's biggest wine company, is
considering launching a rival bid to the £7.4 billion offer tabled
by Pernod Ricard, reports Chris Mercer.

Constellation said it "is at an early stage of evaluating its options with a number of potential partners and there is no certainty that this process will lead to an approach being made to the company"​.

Constellation's statement follows a raft of media speculation about its intentions towards UK-based Allied Domecq and comes after the offer for Allied from France-based Pernod Ricard with US-based Fortune Brands as a partner.

The competition stakes are high with Pernod set to become the world's largest wine and spirits group if successful, grabbing core spirits brands such as Beefeater gin, Malibu and Stolichnaya vodka as well as premium wines including Montana and Campo Viejo.

As a result, analysts have suggested there may be counter bids and Constellation could use a deal with Allied to bolster its wine business and possibly even gain new avenues in the spirits sector, while also preventing the creation of a more powerful rival.

Constellation is the seventh largest spirits maker in the world and already owns a range of big wine brands such as Ravenswood and BRL Hardy.

Any company acquiring Allied may also look forward to cost savings that greater consolidation could bring. Philip Bowman, chief executive of Allied Domecq, said consolidation was increasingly necessary in spirits due to tough economic and competitive conditions.

The door for Allied has certainly been left ajar with any Pernod takeover expected to take up to four months and no date yet set for Allied's shareholders to vote on Pernod's offer. But, Allied did agree to pay Pernod £37 million if it is beaten by a competing offer within the next six months.

Even so, if Pernod is to be successful then it may also have to increase its offer with the Allied share price rising rapidly - up to 71.5 pence per share by the end of yesterday - and now only a few pence below Pernod's bid.

Pernod said it planned to sell a range of Allied's brands to US firm Fortune Brands for £2.8 million (€4.1 million) cash if its bid is successful.

These include Canada Club, Courvoisier, the super-premium Clos du Bois Californian wine brand and Allied's US wine distribution network in the UK, Germany and Spain. Pernod will also sell its own Larios brand.

The move is thought to be an attempt by Pernod to head off competition authorities that may challenge its takeover of Allied due to the resultant market concentration.

Last week, Allied announced a seven per cent rise in net profits to £285 million, though overall sales were flat at around £1.7 billion. Sales of spirits and wine crept up one per cent to £1.236 billion.

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