Pernod in €7.4bn takeover of Allied Domecq

 

Pernod Ricard yesterday struck a deal to acquire Allied Domecq for some £7.4 billion (€10.8 billion) in stock and cash, combining the world's second- and third-largest spirits makers to create a company to rival Diageo, the market leader.

The offer, understood to value the UK spirits maker at 670p per share, was put to Allied's board yesterday. The board is understood to have accepted and is expected formally to announce the takeover tomorrow.

Pernod Ricard owns Irish Distillers whose brands include Jameson Whiskey. Allied Domecq distributes certain products in Ireland through an agreement with C&C.

About 20 per cent of the takeover price will be funded through the issuance of Pernod shares, while the remainder is to be paid in cash, with Fortune Brands, the US group, contributing about £2.8 billion.

Pernod will raise cash in the debt markets, most likely through a syndicated loan. Pernod will become the owner of one of the world's top gin brands, Beefeater, as well as Ballantine's whisky. Fortune Brands, which has been working with Pernod, is expected to take Allied's key cognac brand, Courvoisier, and its Kentucky bourbon, Maker's Mark.

Fortune should acquire Allied's US wine business, although Pernod will retain the UK company's wine operations in Spain and New Zealand. Pernod first entered the wine business in 1989 when it acquired Jacob's Creek, the Australian brand, as a means of obtaining access to distribution networks it could use to market its spirits brands.

Pernod will keep Allied's liqueur business, which includes the US distribution rights to the coffee liqueur Tia Maria.

Pernod has a small liqueur portfolio and has been eager to increase its liqueur brands, popular with female drinkers.

To help fund the acquisition, Pernod is expected to sell Dunkin' Brands, Allied's food business, which operates the Dunkin' Donuts coffee chain and the ice cream franchise Baskin Robbins. Fortune will gain access to Allied's distribution networks in the UK, Spain and Germany.

Pernod is understood to have been in talks with SPI Group, the Russian owner of Stolichnaya vodka, over the future of the brand's marketing and distribution rights in the US.

The Russian brand is the third-largest vodka brand in the US after Smirnoff and Absolut Vodka.