Guinness rivals step up merger protests

Rivals of Guinness and Grand Metropolitan are set to intensify the pressure on the UK drinks groups' proposed pounds 23bn merger by writing to the European Commission outlining their objections to the deal.

Allied Domecq, Irish Distillers and Seagram, the Canadian drinks giant, are due to submit their formal objections to the merger to the European Commission within the next few days, according to sources in Brussels close to the discussions. They are likely to outline their fears that the merger will give Guinness and GrandMet a stranglehold over the European spirits market and a virtual monopoly in certain markets such as Spain, Germany and the Benelux countries.

The EC has already voiced concerns that the merger will give Guinness and GrandMet a dominant position in these spirits markets. It is particularly worried that the new group, called GMG Brands, would have a monopoly over the European Scotch whisky market, with brands such as J&B, Bell's and Johnnie Walker. The EC believes that GMG Brands will have a Scotch whisky market share well in excess of 40 per cent in some countries.

Analysts believe that GMG Brands may be forced to give up several brands to get the green light from competition authorities in Europe and the US.

The three drinks rivals voiced their objections to the GrandMet-Guinness merger at an EC hearing into the deal in Brussels last week. This will be the last hearing into the deal. The EC now has until 27 October to make its final decision on the merger.

GMG Brands will also have to overcome the threat of Bernard Arnault, the head of French luxury goods group LVMH, who has launched his own crusade to scupper the deal.