Allied Domecq 'being eyed by Pernod'

Drinks giant Allied Domecq was today reported to be a takeover target of the French owner of Jameson whiskey, Chivas Regal whiskey and Jacob’s Creek wines.

Shares in Allied, which produces Beefeater gin and Tia Maria, surged 6% on the back of a media report that said it was the number-one acquisition choice of Pernod Ricard.

The market value of Allied rose to £5.75bn (€8.3bn) after the Wall Street Journal (WSJ) reported that Pernod has retained investment bankers to look for deals.

Analysts played down the chances of a tie-up, pointing out the potential regulatory issues and that the WSJ report said the drinks firms had yet to make contact about a deal.

Pernod was also still getting to grips with the acquisition of two-thirds of Seagram’s drinks portfolio in 2001, they said.

Barclays analyst David Liston rated the possibility of a deal at less than 50% and said a merger was more credible than an outright takeover by Pernod.

He said: “I think there are regulatory issues which would augur against the deal and at the moment I don’t think Pernod can afford it.

“Pernod has brought down its debt a long way from when it bought its part of the Seagram business, but the acquisition of Allied Domecq would still require quite a significant amount of equity issuance.”

Consolidation of the global drinks industry has been widely expected, but analysts believe there would be some overlap between the two firms’ drinks portfolios.

At the same time, Allied chief executive Philip Bowman was quoted last year as saying that tough trading conditions in France and Germany mean there was currently no reason to try and raise its 5% share of the market there.

Allied Domecq, which is based at Bristol, employs more than 13,000 staff worldwide and counts Ballantyne’s whisky, Malibu and Stolichnaya vodka among its other drinks brands.

It also has the Quick Service Restaurants division, which includes Dunkin’ Donuts and Baskin-Robbins ice cream parlours.

James Dawson, of brokers Charles Stanley, said the bid rumours appeared to be a “little bit far-fetched” and Allied Domecq was more likely to want to hoover up small brands rather than contemplate a major deal.

This was because some of the biggest brands in the industry were not growing as much as companies would like despite the amount of marketing being put behind them, he said.

Mr Dawson added: “Pernod has a fairly significant portfolio already and if they started to incorporate the likes of Allied then you would have to question the level of competition in the industry.”