Shares in Allied, which owns brands such as Ballantine's whisky and Beefeater gin, rose more than 6 per cent yesterday on hopes that the businesses will join forces to become one of the biggest drinks companies in the world. Its shares closed up 22.5p at 514.5p.
Industry insiders, however, believe Diageo, whose empire spans Guinness to Smirnoff, could be in conjunction with Pernod over a possible joint bid for Allied that would see the Allied estate carved up. The pair collaborated in 2000 to take on the Seagram drinks business.
Richard Burrows, the chief executive of Pernod, said on Thursday: "We are always looking at opportunities."
Analysts are sceptical, however, that Diageo would be allowed to take on any more large drinks brands on competition grounds. But even a deal between Allied and Pernod would be hard to engineer. A full takeover may be difficult for Pernod to finance, and Allied's management may not be willing to swallow a merger of equals.
Pernod's interest could spark Allied in to takeover action itself. Allied is interested in buying wine brands from the Australian wine business, Southcorp, which is in the midst of a takeover battle by Fosters. James Dawson, at Charles Stanley, said: "If Pernod is lining up for Allied, it may prompt Allied to make a full offer for something like Southcorp in order to deter people from bidding for it."