US battle for Dewar's looms

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Grand Metropolitan and Guinness are expected to surrender their Dewar's Scotch whisky and Bombay gin brands in order to get their pounds 24bn merger past the US Federal Trade Commission (FTC).

The FTC's decision is likely to fuel a bidding war for Dewar's among some of the world's biggest drinks companies. The opportunity to buy one of the best-selling whiskies in the world will generate intense interest in the industry as it is the biggest whisky brand to come on the market since Guinness made its infamous move for Distillers in 1986.

It also promises to remove the last main obstacle to the deal. The FTC could rule on the bid as early as today, although the two sides remain in discussions and a decision may not be reached until early next week.

The European Commission has already ordered Guinness and GrandMet to dispose of Dewar's in Europe. The FTC's decision means it can market the brand on a world-wide basis.

Analysts estimate that Dewar's makes an annual profit of pounds 50m and is worth at least pounds 500m. If a bidding war ensues it could fetch up to pounds 700m.

Seagram, the Canadian drinks giant, has already expressed its interest in Dewar's. It would dearly love to add a big whisky brand to its extensive spirits portfolio. Allied Domecq is also a likely bidder, not having a large exposure to the US whisky market, as are Bacardi and Pernod-Ricard. Brown Forman and American Brands could also look to add Scotch to their famous bourbons, Jack Daniel's and Jim Beam.

A Guinness spokesman confirmed that several parties had already expressed an interest in acquiring Dewar's.

Dewar's is the best-selling whisky brand in the US with 1.5 million cases shifted annually. John Dewar started selling Dewar's more than 150 years ago. Dewar's White Label struggled during the Prohibition years in the US and became part of the Distillers group in 1925.

Bombay and Bombay Sapphire produce a profit of less than pounds 10m a year and are unlikely to fetch more than pounds 100m.

Outlook, page 25