Allied Domecq to sell C&C for £580m

Cantrell & Cochrane is now expected to be sold by Allied Domecq to the British venture capital group, BC Partners, for £530 million sterling (£580 million), and a flotation of the drinks distribution group is now seen as unlikely. It is understood that the final details of the sale are now being worked out between Allied and BC and a formal announcement of the sale may come within days.

A spokesman for Allied Domecq would not comment on the negotiations, but one source said: "It looks like a deal is well advanced but it has not been concluded." He said that Allied Domecq has not yet ruled out the option of floating C&C on the Dublin and London stock markets and added that Goldman Sachs and Investment Bank of Ireland (IBI) are both continuing to work on the direct sale and flotation options respectively.

The expected decision to sell C&C to BC Partners will come as a blow to Irish institutional investors who were keen to see a company of the size and profitability of C&C on the market. It will also come as a blow to the C&C management and group managing director, Mr Tony O'Brien, who favoured the flotation option and the scope for expansion that being a plc would have given C&C.

Last July, after Allied Domecq bought out Diageo's 49.6 per cent stake in C&C for an estimated £270 million, the British drinks group appointed Goldman Sachs and IBI to evaluate the various options. Goldman Sachs was charged with finding a single buyer for the company and IBI to look at the flotation option.

It soon emerged that there was no single trade buyer willing to buy C&C, mainly because the Irish company, while hugely profitable, is too diverse in an industry which is increasingly consolidating into a small number of international companies focused on global brands.

In mid-November, it emerged that five venture capital companies - none of them Irish - had carried out due diligence on C&C and that three of these had been short-listed as potential buyers. This was soon narrowed down to one - BC Partners - which has been in exclusive negotiations with Allied Domecq for the past three to four weeks.

But if C&C is sold to a venture capital company like BC Partners, it opens up the possibility of a stock market flotation in possibly five years' time. Venture capital investors tend to have a five-year time scale for their investments before they look to realise a profit, and more often that not this profit is realised through a stock market flotation.

The requirement, however, for venture capital investors to get a specific return on their investment might mean that C&C's growth in the period under venture capital ownership might be severely curtailed, with the investors reluctant to advance the level of funds that the C&C management would want for expansion through acquisition.

C&C has not revealed its financial results for the year to the end of August, but it is understood that the group generated profits in the order of £60 million. The group's net cash is likely to have risen to around £75 million given the strength of its cash flow and the absence of any significant acquisition in the past year.