Allied Domecq keeps options open over Seagram sale

Allied Domecq, the spirits company behind Ballantine's whisky and Beefeater gin, yesterday said it was not prepared to overpay for the drinks assets being auctioned off by Seagram of Canada, adding that it was examining other opportunities.

Allied Domecq, the spirits company behind Ballantine's whisky and Beefeater gin, yesterday said it was not prepared to overpay for the drinks assets being auctioned off by Seagram of Canada, adding that it was examining other opportunities.

Unveiling a 16 per cent leap in its underlying full-year profits, the group said: "Our commitment to participate in [the consolidation] process will be tempered by our desire to create value for shareholders from any transaction."

Philip Bowman, Allied's chief executive, added: "The Seagram deal is not the only opportunity we see. Like any good management team, we are looking at other options.... You can't simply put a business in suspended animation for the sake of one particular deal."

Allied is one of the three bidding teams that are vying for control of Seagram's wine and spirits portfolio, thought to be worth about $7bn (£4.8bn). The sale has been described by analysts as a "once in a lifetime opportunity" for Allied to catapult itself into the premier league and compete almost head on with Diageo, the industry leader. One analyst said yesterday: "This is not exactly a demonstration of fighting spirit.... It could indicate that that Allied does not believe that it will win the auction."

It is understood Seagram executives have been angered by the aggressive tactics which Allied has employed in the auction, suggesting the group could be at a disadvantage if the choice of a final winner is a close-run thing. On Friday, the UK company shocked its fellow bidders by announcing that it had formed a strategic alliance which, in theory, gives it the right of first refusal to the Captain Morgan rum brand. Allied is also the only potential buyer that has refused to sign a confidentiality clause relating to the sale process.

Allied's pre-tax profits for the year to 31 August were£404m excluding the now disposed of Panrico Spanish bakery unit, compared to £349m the previous year.

The growth was driven by a turnaround in the company's overseas operations, which in turn was helped by controlled price increases and a realignment of marketing expenditure behind higher margin brands. Total marketing costs for the spirits and wine businesses increased by 9 per cent to £301m in the period.

The only blackspot was Mexico, where an industry-wide shortage of the agave cactus, which is used to produce tequila such as Allied's Sauza brand, added £12m to operating costs for the region.

Allied's quick service restaurants division, comprising its Dunkin' Donuts and Baskin-Robbins stores, increased its trading profit by 14 per cent to £64m in the full-year. Mr Bowman said it was intended that the food unit would remain part of the business going forward.