Pernod linked to Allied spirits buy

PERNOD-RICARD, the French drinks group, was yesterday said to be raising funds for an agreed takeover of Allied Domecq, the leisure group that has agreed to sell 3,500 pubs to rivals Whitbread. Shares in Allied Domecq were almost static, however, as analysts said Pernod's move was aimed at strengthening its balance sheet rather than launching a bid.

Pernod, which has ruled out hostile takeovers, was reported to arranging pounds 3bn of bank financing through French investment houses Credit Lyonnais and SG Investment Banking. Alain-Serge Delaitte, a spokesman for the Paris-based group, said Pernod would not comment on speculation.

A spokeswoman for Allied Domecq also declined to comment on Pernod's move, but said: "Now Allied has agreed the Whitbread deal, it will be focusing on its spirits business."

Analysts were divided on the merits of a cross-Channel tie-up. Some said Pernod, capitalised at around (pounds 2.37bn) would need a one-for-one rights issue in addition to the mooted financing to bid for the spirits business, estimated to be worth pounds 4.5bn. Others said Pernod could raise its bank borrowings and there was logic to the tie-up based on significant cost savings. Seagram, the Canadian company, and Brown Forman of the US are also thought likely to bid for Allied Domecq.

Allied Domecq shares ended up 2.5p at 62.6.5p.