Revised Allied Domecq bid may better suit other winemakers

Second tier and smaller winemakers may find a revised bid from France's Pernod Ricard for Allied Domecq a more palatable proposition.

The new bid would cede Allied Domecq NZ - formerly Montana Wines - to rival Diageo.

Pernod is set to pay 7.5 billion ($19.3 billion) for Allied Domecq and Diageo yesterday said it would buy most of Allied's New Zealand wine business if the bid was successful.

Diageo, the world's biggest spirits group, has agreed on an option to buy Allied Domecq NZ for about 320 million ($834 million). The new agreement strengthens Pernod's hand in its battle for Allied with rival Constellation Brands.

Allied Domecq bought Montana and its wine-related assets in 2001 for about $1 billion, including $620 million of new foreign investment.


Pernod's original bid, unveiled in April, would have seen it add Allied Domecq NZ, this country's biggest winemaker, to its Framingham business, owned through its Australian subsidiary Orlando Wyndham.


Wine industry figures expressed concern when Pernod disclosed its original plan in April, saying its New Zealand arm would have more clout and could increase pressure on its local rivals.

Analysts said a tie-up between the French and British groups would be felt by winemakers competing in the same field as Allied Domecq, such as Delegat's Group and Villa Maria.

Villa Maria Estate's founder and sole owner George Fistonich said yesterday that while there was little in it, Diageo ownership of Allied Domecq NZ "would be an improvement" to Pernod snapping up the company.

"Pernod Ricard has Cloudy Bay and added on to Montana-Corbans-Stoneleigh would make it pretty big," Fistonich said.

He saw little chance Pernod would flick on its Cloudy Bay business to Diageo as well as Allied Domecq NZ if it succeeded with its bid.

"I imagine Cloudy Bay would be a jewel in their crown, they wouldn't want to get rid of that."

Diageo, the firm behind Smirnoff vodka, Johnnie Walker whisky and Guinness beer, also said it had agreed with Pernod to cease talks with any third party in connection with the purchase of any of Allied's brands, tying it to Pernod.

In a separate deal, Diageo also agreed to buy Bushmills Irish Whiskey from Pernod for around 200 million. Bushmills is the number two Irish whiskey, behind market leader Jameson, which is owned by Pernod.

Analysts said it was a clever move by Pernod, selling two smaller businesses to Diageo and preventing Diageo from joining any rival bidding group. They had previously thought Diageo would be interested in more of Allied's brands such as Maker's Mark bourbon, Courvoisier cognac and Mumm champagne.

Constellation declined to comment, but one source said it made no difference to the consortium's position and it was working towards making a bid by the June 29 deadline set by Britain's Takeover Panel.

Pernod and Allied expect their deal will be completed on July 26 and close in late 2005 or early 2006 after regulatory clearance.

In late April, Allied agreed to be bought by Pernod and its US partner Fortune Brands, which owns Jim Beam bourbon.

The two groups agreed to split up Allied's brands with Pernod taking Ballantine's whisky, Beefeater gin and most of Allied's wines, and Fortune picking up Sauza tequila and Kahlua liqueur.

This sparked interest in Allied from a consortium headed by Constellation Brands, which has made a bid proposal, but no formal offer.

- NZPA