Pernod clear for Allied bid after Orangina deal

PERNOD RICARD is expected to receive the go-ahead this week for the £460m sale of its Orangina unit to Coca-Cola, clearing the way for the French spirits company to launch a bid for its UK rival Allied Domecq.

PERNOD RICARD is expected to receive the go-ahead this week for the £460m sale of its Orangina unit to Coca-Cola, clearing the way for the French spirits company to launch a bid for its UK rival Allied Domecq.

Analysts say that while a bid for Allied is not dependent on the Orangina ruling from the French competition authorities, Pernod has been holding off on making a public announcement of its intentions until the issue is resolved.

Ian Daly, an analyst at Charles Stanley, said: "Allied needs a partner and Pernod fits the bill. The rumours of a merger were around last week and the week before. But if the Orangina sale is cleared, that increases the likelihood of things moving ahead."

Speculation that Pernod is plotting a takeover of its larger UK rival mounted last week after Pernod's chairman, Patrick Ricard, dispelled concerns that a potential link-up with Allied would be scuppered by the reluctance of Pernod and Ricard family members to dilute their holdings in the company. At a trade fair in France, Mr Ricard said: "If it is in the shareholders' interest to reduce the families' participation, we'll do it."

A company spokesman added: "The families' interests have already been diluted once - in 1975 when Pernod Ricard was founded - so there is no principle against dilution if the company's strategic interests and the interests of the shareholders make it necessary."

However, Mr Ricard refused to comment directly on whether it planned to bid for Allied, saying: "We are ambitious, we want to start new product lines but this can be achieved through the takeover of some regional brands."

He also denied that Pernod had raised £3bn in debt to fund the acquisition, although analysts said this did not preclude the possibility that Pernod has put in place credit lines without yet drawing down the debt.

One question hanging over the potential Pernod bid would be the future of Allied's foods businesses, Dunkin' Donuts and Baskin Robbins, which would not fit easily into Pernod's existing portfolio. Analysts say that this issue could be resolved if Pernod teamed up with a partner to launch a bid. Allied's food unit alone is valued at about £475m.

If Pernod does decide to pounce, other bidders could join the fray, the most likely candidates being Canada's Seagram, Pernod's arch rival Bacardi or the US-based company Brown Foreman.

Pernod has been in discussions to sell Orangina for almost two years. The French Finance Ministry last year blocked the sale on competition grounds, but earlier this year, Coke agreed not to distribute Orangina in French hotels, cafes and restaurants for 10 years and lowered its bid from FFr5bn to FFr4.7bn. Pernod has said it is "confident" that the deal will go through this time round.