Pernod Ricard
Pernod, whose brands include Martell cognac and Jacob’s Creek wine, said it was "considering a takeover offer" for Allied Domecq in cooperation with Fortune Brands.
updated 4/5/2005 1:08:46 PM ET 2005-04-05T17:08:46

French beverage group Pernod Ricard SA is in talks about a possible buyout of its larger British rival Allied Domecq PLC, possibly with assistance from U.S. liquor and consumer products company Fortune Brands Inc.

Tuesday’s announcement of the talks drove up by nearly 18 percent the shares of Allied Domecq, which makes Ballantine’s whiskey and Beefeater gin. Pernod brands include Martell cognac and Jacob’s Creek wine. Fortune distributes Jim Beam whiskey and Absolut vodka.

Amid mounting media speculation that a deal was imminent, Pernod said it was “considering a takeover offer” for Allied Domecq in cooperation with Fortune Brands, which is based in Lincolnshire, Ill., and Allied confirmed the discussions.

Fortune said in a statement that it is “working closely with Pernod Ricard” regarding a potential offer. It made no further comment and a Fortune Brands spokesman did not immediately respond to a telephone call.

All three companies stressed that the talks would not necessarily lead to a deal, and none spelled out what Fortune’s role would be in the possible takeover.

Analysts suggested Fortune would assist Pernod with financing and take for itself some of Allied’s drinks brands, which also include Malibu coconut rum and Canadian Club whiskey.

Investors have long expected consolidation among second-tier drinks companies like Allied and Pernod, whose combined sales amount to two-thirds of those of Diageo PLC — the British-based world No.1 with brands such as Smirnoff vodka, Guinness stout and Johnnie Walker scotch.

Stronger footing
Analysts say a bid from Pernod could value Allied at up to $12.21 a share, or around 7.2 billion U.K. pounds ($13.5 billion), and say a deal would put the combined company on a stronger footing to compete with Diageo.

A Pernod-Allied deal would also fill gaps in both companies’ drinks portfolios. Pernod, for example, currently has no champagnes, while Allied has two — Perrier Jouet and Mumm.

Jeremy Batstone of Charles Stanley Stockbrokers said the talks had not come as a surprise, but warned that many hurdles remained.

“There will be a lot of regulatory interest in any offer,” Batstone said. “We are still in the foothills of what could be quite a long slog.”

Pernod Ricard said last month that it earned 487 million euros ($652 million) in 2004 on sales of 3.57 billion euros ($4.8 billion). Allied Domecq, whose businesses also include Baskin-Robbins and Dunkin’ Donuts, had 2004 sales of about $5.8 billion.

Diageo, meanwhile, said in February that it earned 869 million pounds ($1.64 billion) in the first half of the fiscal year on sales of 4.98 billion pounds ($9.44 billion). The company had sales of about $16 billion in its previous full fiscal year.

Besides producing and distributing spirits brands, Fortune Brands has interests in golf equipment such as Titleist, Cobra and FootJoy and the Moen faucets, Master Lock and Therma-Tru doors businesses.

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