Drinks giant in merger talks

Drinks giant Allied Domecq has held secret merger talks with privately-owned rum distiller Bacardi about a deal which would value the combined group at around £10bn, according to reports today.

The Observer newspaper said Allied’s chief executive Philip Bowman had met Ruben Rodriguez, the Bacardi chairman, at the rum group’s Bermuda headquarters in the last month in an effort to strike a deal.

Unnamed industry sources were also reported by the paper to have said Allied chairman Gerry Robinson had also met Mr Rodriguez and that the two men had established a good rapport.

At an investors meeting last Wednesday, Bacardi shareholders are understood to have agreed to prepare for a possible flotation of the company, founded in Cuba in 1842.

The agreement means outsiders could be allowed to hold shares in the family-controlled business for the first time.

The Observer said the move was viewed in the City as evidence of the new spirit of glasnost sweeping Bacardi, an openness that could make it more amenable to the idea of merger with Allied Domecq.

Speaking to the newspaper, Williams de Broe drinks analyst David Hallam said: “Bacardi and Allied would be an excellent combination: they would complement each other’s brands and fit well geographically.”

Bacardi rum is the best selling spirits brand in the world. The firm also owns Dewar’s whisky, Martini vermouth and Bombay gin.

Allied’s leading brands include Canadian Club, Courvoisier, Tia Maria and Kahlua.

Last month Allied said it expected to meet full-year earnings forecasts.

The two face increasing competition from Diageo, the world’s biggest drinks group, which owns brands including Smirnoff vodka and Guinness.

Diageo and Pernod Ricard stole a march on competition in 2000 when they jointly bought the Seagram drinks empire from the Bronfman family.