Regulator gives green light to Seagram deal

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The US competition authorities yesterday cleared the way for Pernod Ricard and Diageo to take over their respective shares of Seagram's wine and spirits empire after the British drinks group agreed to divest its Malibu rum brand.

The Federal Trade Commission (FTC) voted 5-0 to allow the $8.15bn deal. In October (TRW 24/10/01), the FTC voted to block the transaction on fears Diageo could create a duopoly in the US rum market with industry leader Bacardi. "The consent order announced today addresses those concerns," FTC competition bureau chief Joe Simons said in a statement. Diageo also agreed not to obtain or use any commercially sensitive information regarding four other brands that Pernod will acquire, the agency said. Those brands: Seagram's Gin, Chivas Regal Scotch whisky, The Glenlivet Scotch whisky and Martell Cognac are direct competitors with Diageo in the US.

The deal has been previously approved by European and Canadian regulators. The FTC's consent comes exactly a year after Diageo and Pernod announced their joint purchase of the Seagram drinks business owned by Vivendi Universal.

Pernod Ricard said it was pleased to confirm the closure of the deal. In the next few days the group's core business will double in size and it will become one of the three leading operators in wine and spirits. Shortly Diageo and Pernod Ricard will complete the disposal of the following Seagram assets: Four Roses Bourbon (to Kirin Brewery Co of Japan), Sandeman Port (to Sogrape Holding of Portugal), Mumm Sekt (to Rotkappchen Sektkellerie of Germany) and Oddbins (to Castel Fréres Group of France). The total brands thereafter owned by Pernod Ricard will represent an annual volume of approximately 46m cases for spirits and 17m cases for wine. From 2002, whisky, with 13m cases, becomes the group's primary area of activity.

Diageo said it had entered discussions with a number of parties interested in buying the Malibu brand, which it must sell within six months under the agreement with the FTC. "These acquisitions will sharpen Diageo's focus on premium drinks and give us further potential to create new value for our shareholders," Diageo chief executive Paul Walsh said.

Diageo is paying $4.95bn for Seagram brands such as Captain Morgan and Crown Royal Canadian whisky, while Pernod is paying $3.2bn for its share.