Drinks giants set to splash out for Sweden's V&S

Sell-off of state-owned companies to unleash bid battle for owner of Absolut vodka
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The Independent Online

Some of the biggest names in the drinks industry, including US giant Constellation Brands, are preparing to put together possible bids for Vin & Sprit, the multi-billion-pound owner of trendy Swedish vodka Absolut.

V&S is owned by the Swedish state, but the country's recently elected government has pledged to sell off a number of nationalised companies. And last week, the Swedish finance minister confirmed that the proposed sale of V&S would be put before parliament by March at the latest.

Absolut is the world's third- largest spirit brand and is sold in 126 markets, making V&S an attractive acquisition for various trade and finance buyers.

A spokesman for Constellation Brands, the world's largest wine group with brands such as Hardys Stamp, said the group never commented on market rumours. But he did concede: "We have [in the past] stated that we look at all opportunities in the beverage and alcohol world and evaluate what the potential is. And a primary focus for Constellation Brands is to expand its mid-premium and premium spirits business."

Meanwhile, Scandinavian drinks group Arcus has also stated its interest. Arne Karlsson, chief executive of private equity firm Ratos, which owns Arcus, told The Independent on Sunday: "When it comes to wine, wine importing and production of spirits, you find one main player in Norway - and that's us, Arcus - and V&S in Sweden. So for that reason we would of course be very interested in looking at V&S."

Meanwhile, Ratos's senior investment manager, Leif Johansson, told industry website just-drinks.com that the firm was "discussing a new strategy that would focus on the development of local brands. We are open to looking at the possibility of acquiring V&S."

But Mr Karlsson confirmed that the company would not be interested in buying the Absolut brand. "It's a totally different brand: it's not local, it's international, which also means that there will be a large number of industrial and finance buyers interested, and so the price tag will rocket."

Sources say Constellation is interested in Absolut, however, while others in the running include French group Pernod Ricard, which swallowed Allied Domecq two years ago, and US business Fortune Brands.

"We think Pernod Ricard would benefit most from an acquisition of V&S," said JP Morgan drinks analyst Simon Hales. "The group's portfolio lacks a premium vodka brand and Absolut's strength in the US could catapult the group's market share from number five to number two." JP Morgan is valuing V&S at between €4bn (£2.6bn) and €4.6bn.

However, Fortune currently distributes the V&S brands, and most observers agree that it would aggressively pursue an acquisition to retain that business.