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Allied opens talks on spirits deal

ALLIED DOMECQ has started separate talks with Brown-Forman of the US and Bacardi of Puerto Rico about a possible spirits mega-merger, while French group Pernod Ricard is pondering its own pounds 5bn bid for the British group.

Allied Domecq's spirits business has moved into the merger spotlight following the group's agreement last week to dispose of its 3,600 pubs to Whitbread. Previously other spirits groups have been put off doing a deal with Allied by the presence of the pubs estate.

Philip Bowman, who recently replaced Tony Hales as chief executive of Allied Domecq, has had to move swiftly to sort out the remains of the group and to restore City confidence. Allied is still the world's second biggest spirits group.

Mr Bowman has proposed a pounds 12bn merger with Brown-Forman, which would combine Allied's Beefeater gin, Sauza tequila and Ballantine's whisky with the latter's Southern Comfort and Jack Daniel's whisky.

At the same time Mr Bowman has approached Bacardi, the world's third largest spirits group, which makes Bombay Sapphire gin and Dewar's whisky.

Meanwhile, Pernod Ricard, the French drinks group, has retained Banque Nationale de Paris and City advisers to help prepare its own bid. Pernod owns Jameson and Bushmills whiskeys, Bisquit cognac and Dubonnet vermouth.

Pernod declined to comment. "We have the will to expand and to look at every opportunity that will be in the market, and we have the means to do it, but we cannot comment on every rumour,'' said Alain-Serge Delaitte, the Pernod spokesman.

A deal by Pernod would be a considerable coup for the French, as it is capitalised at just pounds 2.4bn on the Paris Bourse.

The group is run by Patrick Ricard, whose family owns 10 per cent of the company. It recently sold the Orangina soft drinks business to Coca- Cola for nearly half a billion pounds, giving it added fire power in any bid battle for Allied. A deal would also silence sceptical analysts who say the French group is too small to compete with global players like Diageo.

Brown-Forman and Bacardi are also family controlled. The former is quoted on Wall Street while the latter has a 137-year history of independence which it may not part with lightly.

Analysts value Bacardi at pounds 5bn, while Allied is worth pounds 6.2bn, making any deal a merger of equals. Brown-Forman's market capitalisation is just pounds 2.5bn, making it more of a straight acquisition for Allied.