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Numerous Wineries in Play as Two Companies Make a Joint Bid for Allied Domecq

Pernod Ricard and Fortune Brands angle for their rival's spirits brands, but where will labels such as Clos du Bois and Mumm end up?

Tim Fish
Posted: April 6, 2005

Some of the world's best-known wineries may be changing hands if spirits giants Pernod Ricard and Fortune Brands succeed in their joint bid to buy Allied Domecq, one of their major competitors.

All three companies acknowledged this week that they are in talks for a possible deal, and analysts estimate that Allied Domecq could fetch between $13.5 billion and $14.5 billion.

"We are in the very early stages of discussions, but there is no offer on the table," said Stephen Whitehead, director of corporate affairs for Allied Domecq.

London-based Allied Domecq, which is publicly traded on the New York Stock Exchange, is one of the largest drinks companies in the world and has made numerous winery acquisitions in the past five years. Its European wine brands include two of Champagne's best-known names--Mumm and Perrier-Jouët--along with Cockburn's Port and Domecq Sherry. It has extensive holdings in California, including Clos du Bois, Gary Farrell, Buena Vista, William Hill, Mumm Napa, Atlas Peak, Callaway, J. Garcia and Haywood Estate. In 2001 alone, the company purchased New Zealand's largest wine producer, then known as Montana Wines, which makes Brancott, Stoneleigh and other brands; Spain's largest wine company, Bodegas y Bebidas, with wineries in nine regions; and two wineries in Argentina.

But one Allied Domecq insider, who asked to remain anonymous, said the wine brands play only a supporting role in the potential deal. "Pernod only wants the spirits," the insider said.

Allied Domecq owns or has profitable distribution deals with spirit brands such as Sauza tequila, Stolichnaya vodka, Canadian Club, Beefeater gin, Kahlua and Courvoisier Cognac. Many of those would be appealing to Paris-based Pernod, the world's third-largest spirits marketer with brands that include Chivas Regal, Glenlivet, Bushmills, Wild Turkey, Martell Cognac and Seagram's gin.

Chicago-based Fortune Brands, through its subsidiary Jim Beam Brands, is expected to provide significant financing for the deal, but how much of Allied Domecq it might walk away with is unknown. In addition to the Jim Beam brand, it owns spirit labels such as Old Crow, Knob Creek, Gilbey's gin and Vox vodka.

Which company will ultimately end up owning Allied Domecq's wines is difficult to say. Fortune's Peak Wines International subsidiary owns California wineries Geyser Peak, Canyon Road and Wild Horse , which it bought in 2003. Pernod Ricard owns a large Australian wine producer, Orlando Wyndham, whose brands include the widely selling Jacob's Creek and Wyndham Estate lines.

Allied Domecq's wine division could ultimately be spun off into a separate company, sources say.

Analysts believe a deal will be announced within a matter of weeks.

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