Legal wrangle over Seagram sell-off

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The Independent Online

Diageo, the world's biggest spirits company, and Pernod Ricard, the French group which it is partnering in the $7bn (£4.8bn) bidding for Seagram's drinks assets, are seeking legal advice on how to respond to claims by Allied Domecq that it has secured the rights to one of the most coveted brands in the Seagram portfolio.

Diageo, the world's biggest spirits company, and Pernod Ricard, the French group which it is partnering in the $7bn (£4.8bn) bidding for Seagram's drinks assets, are seeking legal advice on how to respond to claims by Allied Domecq that it has secured the rights to one of the most coveted brands in the Seagram portfolio.

The auction has been thrown into confusion following Allied's shock announcement on Friday that it had formed a strategic alliance with Destilería Serralles, the Puerto Rican company which makes Captain Morgan rum on behalf of Seagram.

A spokesman for Pernod Ricard said yesterday: "We have no comment before our lawyers have been able to meet with those of Seagram and those of Diageo." But it added: "We hold to the statement issued by Seagram saying that this accord has no value." Officials at Diageo, which is thought to be more wary, declined to outline their position.

Industry sources have suggested that the Diageo-Pernod team may seek to have the auction scrapped and restarted in the light of claims by Destilería Serralles that it has the right of first refusal to purchase the Captain Morgan brand in the event of a proposed change of ownership. Others have suggested that Diageo could abandon the process altogether, given that it is prevented for competitive reasons from acquiring the whole portfolio and that its main interest is said to lie in acquiring Captain Morgan and a handful of other top brands.

A Seagram official insisted yesterday that the disposal of its spirits and wine division would not be affected by Allied's agreement with Destilería Serralles, saying that the deal was invalid. She said: "We are proceeding as planned. ... We have nothing further to add."

Under Allied's deal with Destilería Serralles, the Puerto Rican company has agreed to sell on Captain Morgan rum to Allied in the event that a company other than Allied wins the bidding for Seagram's spirits assets. But Seagram, which is in the process of merging with France's Vivendi, said Destilería Serralles's right of first refusal was only applicable "under certain limited circumstances", specifically if the Captain Morgan brand was being sold independently of the rest of the Seagram drinks assets.

Meanwhile, Allied is standing by its deal. A spokesman said: "We believe we have an absolutely watertight agreement. ... We are very happy."

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