Pernod poised to swallow UK’s Allied Domecq

PARIS, April 21 (AFP) – French wine and spirits group Pernod Ricard offered EUR 10.7 billion for British rival Allied Domecq Thursday, directly challenging global sector leader Diageo.

Pernod Ricard, the maker of Glenlivet whisky and Havana Club rum, said the agreed takeover would create the “second-largest spirits and wines company worldwide”.

Pernod Ricard said its cash-and share offer was for all stock in Allied Domecq, worth about EUR 10.7 billion (USD 13.9 billion, GBP 7.4 billion).

The friendly takeover, in association with US group Fortune Brands, puts a premium of 36.2 percent on the price of Allied Domecq shares on February 3, the day before speculation about a bid began to build.

The offer values Allied Domecq shares at GBP 0.670 (EUR 0.98), to be paid 80 percent in cash and 20 percent in Pernod shares.

Allied Domecq’s board unanimously recommended the offer to shareholders.

If approved by regulators, the merger, mixing a vast cocktail of top shelf brands, would reposition the global industry.

Pernod Ricard president Patrick Ricard said he was “very satisfied with this transaction which turns us into the real number two in the world in wines and spirits”.

Allied Domecq chief executive Philip Bowman said the offer “provides Allied Domecq shareholders with the ability to crystallise value and an opportunity to continue to participate in the future success of many of our brands within the enlarged business.”

Cost synergies were slated to reach EUR 300 million per year from the third year of operation, well ahead of analysts’ expectations.

Pernod Ricard said the deal would give the combined Pernod-Allied a 26 percent market in North America, a key region for the drinks industry, compared with Pernod’s stand-alone market share of just 12 percent.

“This deal above all brings a unique strategical argument and the price paid reflects the potential in terms of sales, synergies and cash flow of over EUR 800 million,” said analysts at Fideuram Wargny in Paris.

In Paris trade, Pernod Ricard shares topped the CAC 40 leaderboard, surging 6.76 percent to close at EUR 124.80, while the index edged up 0.03 percent to 3,951.02 points.

The share price had climbed nearly 14 percent since the announcement of takeover negotiations on April 5.

In London, Allied Domecq shares shot up 3.42 percent to GBP 0.665 (EUR 0.97), also gaining a lift from the company’s report of a 7.0-percent rise in first-half pretax profit. The FTSE 100 index closed 0.05 percent lower at 4,819.6 points.

Pernod Ricard has grown in 30 years from a small family firm specialising in aniseed drinks to the third-biggest wine and spirits group in the world. Its target, Allied Domecq, ranks number two.

Britain’s Diageo, the industry leader formed in a 1998 merger, has a 10.5 percent share of global sales volume, while Pernod Ricard holds 5.7 percent and Allied Domecq 5.1 percent.

Pernod Ricard intends to retain most of Allied Domecq’s activities, and notably several top brands such as Ballantine’s whisky, Beefeater gin, Kahlua, Malibu rum, Stolichnaya vodka and Tia Maria as well as up-market wines such as Montana, Mumm and Campo Viejo.

The deal will also bring the French group some prominent local brands such as Imperial in South Korea, Wiser’s in Canada and Presidente in Mexico.

But Pernod Ricard has agreed to sell Fortune Brands some of Allied Domecq’s brands and production and distribution assets and the gin label Larios for about EUR 4.1 billion.

Among these brands are Courvoisier cognac, and in the whisky sector Canadian Club, Maker’s Mark, Sauz and Laphroaig, Californian wines including Clos du Bois, and distribution and arrangements and some leading local brands in Spain, Britain and Germany.

European Union regulators are expected to approve the takeover now that Pernod Ricard has found a purchaser for brands in problem markets, Brussels-based legal experts said.

The French group said it would borrow about EUR 9 billion from a group of banks, comprising JPMorgan, Morgan Stanley, Royal Bank of Scotland, BNP Paribas and Societe Generale, to help finance the offer.

© AFP

Subject: French News