World

Another Big Gulp For Diageo

December 19, 2000 / 2:23 PM EST / AP

Diageo PLC and Pernod Ricard S.A. of France beat a rival bid and clinched a $8.15 billion deal Tuesday for Seagram Co.'s alcoholic drinks business.

Diageo, the world's No. 1 spirits company, announced the long-awaited purchase from Seagram's new owner, France's Vivendi Universal SA.

In a struggle of liquor industry titans, the Anglo-French consortium triumphed over a competing offer by Brown-Forman Corp. of Louisville, Kentucky, and Bacardi Ltd. of Bermuda.

A third potential bidder, Allied Domecq PLC, dropped out of the auction last week.

Seagram's drinks business, which its founding Bronfman family built up over three generations, includes such market favorites as Chivas Regal Scotch whiskey and Absolut vodka. It ranked as the world's third-largest liquor company, behind No. 2 Allied Doemcq.

Under the deal, Diageo will acquire 61 percent of Seagram's assets, with the remaining 39 percent going to Pernod Ricard, said Diageo spokeswoman Isabelle Thomas.

Diageo and Pernod Ricard had expected to announce the purchase early in the day but delayed the announcement due to a miscommunication between Diageo representatives in New York and London, according to a source close to the discussions.

The Seagram's unit is being sold off as part of a $30 billion merger of Seagram, Vivendi and pay television giant Canal Plus. The merger created Vivendi Universal, the world's second largest communication group behind the proposed pairing of America Online Inc. and Time Warner Inc.

Vivendi Universal put the Seagram drinks division up for sale last summer to focus on its core business of entertainment and the Internet.

The deal marks the end of an era for Seagram's. Under the guidance of Edgar Bronfman Jr., grandson of the company's founder, Seagram's was transformed into a music and entertainment business. It bought Universal Studio's parent MCA from Matsushita Electric Industrial Co. of Japan in 1995, and the Polygram music company from Phillips Electronics in 1998.

Diageo announced in August that it was linking up with Pernod Ricard to bid for the Seagram's drinks unit. Diageo's brands include Johnny Walker, Guinness and Burger King, while Pernod Ricard counts Wild Turkey bourbon and Havana Club rum among its names.

Brown-Forman, maker of Jack Daniel's and Southern Comfort, formed a rival alliance with rum company Bacardi to make an alternative offer.

Brown-Forman had no immediate comment on the deal.

The contest narrowed to a two-way battle on Wednesday after British spirits and wine group Allied Domecq decided not to join in the auction. Allied said bidding for the Seagram division would not be in the interest of its shareholders.

It also felt the purchase was unnecessary since it recently won exclusive rights to distribute Stolichnaya vodka in the United States, and has a deal it says will allow it to acquire the Captain Morgan Rum brand, owned by Seagram, from Puerto Rican distiller Destileria Seralles.

Industry aalysts say Diageo and Pernod Ricard are likely to face regulatory hurdles in the United States and elsewhere before they can complete the acquisition.