The six-month-long financial chess game for control of Seagram's wines and spirits division has finally ended. A joint $8.15 billion bid by drinks giants Diageo and Pernod-Ricard, which was finalized today, captured the spoils: a portfolio that includes well-known wine and liquor brands such as Sterling Vineyards, Chivas Regal and Absolut.
The two alcoholic beverage companies will split the cost of the acquisition, with London-based Diageo paying $5 billion and French firm Pernod-Ricard paying $3.15 billion. The companies will set up a joint supervisory board to run the business and will share the profits; however, each Seagram's brand will be run individually by either Diageo or Pernod-Ricard.
The deal bolsters Diageo's position as the largest spirits company in the world, putting it further ahead of its closest competitor, Allied Domecq. "We are acquiring some great brands with this business," said Paul Walsh, group chief executive of Diageo, whose beer and spirits holdings currently include Guinness, JosH Cuervo, Johnnie Walker and Tanqueray. "This transaction is the next step in transforming Diageo from a food-and-drinks group with four operating businesses into a focused leader in the global beverage alcohol industry."
The final division of all of Seagram's more than 180 alcohol brands remains to be seen. So far, Diageo has announced that it will acquire Sterling Vineyards -- one of the stars of Seagram's California winery portfolio -- and many of the liquor products, such as Crown Royal and VO Canadian whiskies.
Pernod-Ricard, which is expected to be the world's third largest liquor company once the deal is finalized, will take over Chivas Regal, Glenlivet, Martell Cognac and Seagram's gin, among others. "This acquisition represents a major step for our group and a turning point in the history of our industry," said Patrick Ricard, president of Pernod-Ricard, which encompasses spirits, such as Jameson and Bushmill's Irish whiskies, and wines, such as Australia's Wyndham and Jacob's Creek labels.
Brands that don't fit into either company's portfolio may be sold off in the near future, and bidders are standing by to snatch up various bits and pieces. Potential buyers include Bacardi Ltd. and Brown-Forman Corp., whose competing joint bid for Seagram's entire portfolio was turned down, and Paris-based RHmy Cointreau, which was unable to finance a bid on the group. London-based Allied Domecq, which pulled out of the bidding last week and purchased Mumm and Perrier-JouNt Champagne houses instead, is expected to be interested in Seagram's wine holdings.
In addition to Napa Valleyqbased Sterling Vineyards, Seagram Chateau & Estate Wine Co. owns Tessera, The Monterey Vineyard and Mumm CuvHe Napa. The company is also an importer for classified-growth Bordeaux, estate-bottled Burgundy and brands such as Trimbach from Alsace, Brancott Vineyards from New Zealand and Sandeman Ports and Sherries.
This past June, Seagram Co., the Montreal-based entertainment and drinks giant, was purchased by Paris-based conglomerate Vivendi and its subsidiary, Canal+, a pay-per-view television network, for $34 billion. The new corporation, called Vivendi Universal, will concentrate on creating a worldwide network to disseminate Seagram's film, television and music content.
The wine and spirits business did not fit into Vivendi's overall plans, and it was long expected to sell off that division. After potential buyers spent months pulling together financing and negotiating alliances, Vivendi began accepting bids last week.
Read past news about the Seagram's deal: