Company News

Constellation Joins the Fray

Bidding war for Allied Domecq may be fermenting

LONDON -- U.S.winemaker Constellation Brands Inc. said Monday that it is considering making an offer to rival last week's $14.2 billion buyout proposal for British liquor company Allied Domecq PLC from France's Pernod Ricard SA, reported the Associated Press.

Constellation, the world's largest winemaker with brands like Almaden, Inglenook, Hardys and Ravenswood, said it is "at an early stage of evaluating its options with a number of potential partners" about a possible offer for Allied Domecq.

"There is no certainty that this [image-nocss] process will lead to an approach being made to the company," the Fairport, N.Y.-based company, which also owns brands such as Corona Extra and St. Paulie Girl beers, said in a statement to the London Stock Exchange. It said the statement was prompted by media and analyst speculation about its intentions.

Allied last week recommended that shareholders accept a 7.4 billion pound ($14.2 billion) takeover offer from its smaller, Paris-based rival Pernod in a deal that will make the combined entity the second-largest liquor company and a more serious challenger to world leader Diageo PLC, which has brands including Guinness stout and Johnnie Walker scotch.

Allied has agreed to pay Pernod a 37 million pound ($71 million) fee if a competing offer made within six months of last week's announcement is successful.

Allied shares increased 1.3% to 671.5 pence ($12.83) on the London Stock Exchange, while Pernod shares dropped 1.1% to 122.40 euros ($158.90) on the Euronext Exchange in Paris. Shares of Constellation Brands, formerly known as Canandaigua Brands, rose 38 cents to $56.33 in midday trading on the New York Stock Exchange (NYSE). Its shares have traded in a 52-week range of $32 and $60.15.

Under the deal announced last week, Pernod is offering the equivalent of 670 pence ($12.90) per Allied share and plans to acquire Allied Domecq brands including Beefeater gin, Malibu rum, Tia Maria and Kahlua liqueurs, Stolichnaya vodka and Ballantine's scotch. It would also add premium wines such as Mumm, Montana and Perrier Jouet to the Martell cognac and Jacob's Creek wine it already has in its drinks cabinet.

To appease regulators and help with finances, Pernod plans to sell some of the brands it acquires from Allied to Fortune Brands Inc., a U.S.-based liquor, sports equipment and household products company, for about 2.8 billion pounds ($5.4 billion). Brands to be purchased by Fortune include Canadian Club whisky, Courvoisier cognac, Maker's Mark bourbon and Sauza tequila, and the super-premium Californian wines.

Charles Stanley analyst James Dawson said that Constellation' success in launching a rival bid will be its ability to find a partner to help with funding.

Analysts said that potential partners include Brown-Forman Corp., whose brands include Southern Comfort and Jack Daniels, and privately owned Bacardi Ltd.

Constellation, which analysts believe is interested mainly in Allied's premium wines, declined to comment. It makes and distributes about 200 brands of beer, wine, and spirits.

Constellation is facing greater pressure in the wine market following Friday's decision of directors of Australian winemaker Southcorp Ltd. to recommend that shareholders accept an improved takeover bid from Australian rival Foster's Group Ltd. A merger between the two Australian companies would create the world's second-biggest wine maker behind Constellation, with brands such as Beringer, Wolf Blass, Yellowglen, Penfolds, Lindemans and Rosemount.

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