British duo thirsty for Seagram

Allied Domecq and Diageo are all alone in bid to buy up the drinks group
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Seagram, the drinks business being sold off by the newly created French-Canadian group Vivendi Universal, is almost certain to end up controlled by a British company.

Seagram, the drinks business being sold off by the newly created French-Canadian group Vivendi Universal, is almost certain to end up controlled by a British company.

Only two groups have put in bids in the first-round $7bn (£5bn) auction of the group, which owns brands including Captain Morgan rum, Glenlivet whisky and Martell Cognac.

As predicted in the Independent on Sunday, Allied Domecq has put in an offer, with the only opposition coming from Diageo, which is bidding in partnership with Pernod-Ricard of France.

Expected moves by Bacardi and Brown-Foreman, makers of Jack Daniels whiskey, failed to materialise before the closing date for first-round offers on Friday. Drinks business rumours had linked both companies with the Allied Domecq offer, but Philip Bowman, Allied's chief executive, is understood to be confident he can fund an offer for Seagram, probably without even needing to go to the market with a rights issue.

The Allied Domecq bid received a boost when Vin & Spirit, the Swedish makers of Absolut vodka, said it supported the move by the British makers of Beefeater gin and Ballantine's whisky. Seagram has the rights to distribute Absolut, an agreement said to be worth as much as $2bn. Vin & Spirit is not keen for Absolut to be distributed by Diageo as it owns its rival, Smirnoff. Drinks market sources have speculated that Allied Domecq may end up with a deal for Absolut even if it loses Seagram.

The joint bid by Diageo and Pernod-Ricard has a complex structure which reflects the greater financial muscle of the British company, but also the potential anti-trust problems it would have in buying Seagram. Diageo will own 60 per cent of the joint company but most of the major Seagram brands could end up being owned by Pernod-Ricard. Analysts have expressed concern that Diageo may have to help Pernod-Ricard finance an acquisition that would benefit the French company more than it helped the British one. They have pointed to the relationship Diageo has with LVMH, the French luxury goods group that owns Hennessy Cognac.

The Seagram business is being sold following the merger of its parent company with Vivendi of France. That deal - which brings together Universal Studios with Pathé and Canal Plus - is expected to be approved by the European Commission next month.

The sale of the drinks side has angered some members of the Bronfman family, who founded Seagram in the 1920s. A management buy-out, led by Sam Bronfman, the cousin of Seagram chairman Edgar Bronfman jnr, has failed to materialise, although Sam Bronfman may purchase the wine business, which includes Mumm's Cordon Rouge.

Vivendi Universal is expected to sell off Vivendi Environmental, owners of Connex train-operating companies in the UK. RWE expressed interest in Vivendi Environmental, but its ardour is said to have cooled.

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