Pernod takeover could hit C&C

DRINKS and snack food group C&C could see its profits hit following the takeover by Pernod Ricard of Allied Domecq, whose brands it distributes in Ireland.

Allied yesterday agreed to a cash and share takeover deal by Pernod, headed by Irishman Richard Burrows, worth €10.7 billion. US drinks-maker Fortune Brands are also part of the Pernod bid.

According to analysts, the takeover could have a negative impact on C&C. It distributes a number of Allied Domecq's brands in Ireland, including Malibu rum and Tia Maria. Allied, which once owned C&C, distributes Tullamore Dew Whiskey and Carolan's Irish Cream overseas. The loss of these contracts will be a blow for C&C, with some brokers saying it could shave €2 million from annual profits.

However, informed sources said there was quite a lot of interest from other companies to distribute C&C's brands abroad and that the disruption would be minimal, as would the impact on its earnings. In addition, the contract with Allied Domecq was due to end in 2006. NCB Stockbrokers said yesterday:

"The implications for the distribution of C&C's international niche beverage products is less clear as C&C has alternative distribution options in most regions but there is a risk that new distributors may not be as efficient as Allied Domecq."

Shares in C&C fell 2% yesterday to €3.10. The company is due to release its 2004/05 profits in early May. C&C has already told investors that earnings will be under pressure from unfavourable foreign exchange rates and lower pub sales in Ireland.

The takeover of Allied by Pernod and Fortune brands will create the world's second largest drinks group.

Pernod owners Irish Distillers, will retain the majority of Allied's labels, including Beefeater Gin, Malibu, Ballantine's Whiskey and liqueurs Kahlua and Tia Maria.

Mr Burrows said the enlarged group planned to offload Allied's fast-food business, which includes Dunkin Donuts and Baskin & Robbins ice-cream.

He said he expected some losses from Allied's 13,000 global workforce as a result of a sale that could see the enlarged group claw back about €1.3bn. Pernod aims to retain distribution rights for Stolichnaya Vodka, and round out its drinks cabinet with new-world wines and Mumm and Perrier Jouet champagne.

Fortune, maker of Jim Beam Bourbon, will get the Courvoisier Cognac, Sauza Tequila and Canadian Club Whiskey brands.

Patrick Ricard, Pernod's chairman, said in a statement: "I would like to say how excited we are by this transaction, which is a new major strategic step in Pernod Ricard's development. I believe that Allied Domecq's magnificent portfolio of brands has a great future within our group."

Additional reporting Reuters