Pernod make £7.4bn bid for Allied Domecq

French drinks group Pernod Ricard has reached agreement on terms of to acquire UK rival Allied Domecq for £7.4bn.

The acquisition, which would bring the world’s second and third biggest drinks companies together, has already been approved by Allied’s board.

Pernod said the offer valued each Allied share at 670 pence. It said it was offering 545 pence in cash and 0.0158 of a new Pernod share for every share of Allied.

Pernod said approximately 80 per cent of the offer would be in cash.

Pernod will retain the majority of the Allied Domecq business, including many of the core spirits brands such as Ballantine’s, Beefeater, Kahlua, Malibu, Stolichnaya and Tia Maria, and premium wines such as Montana, Mumm (including Mumm Cuvée Napa) and Campo Viejo.

However, Pernod is intending to sell some Allied assets, including Sauzaa tequila and Canadian Club to the United States’ Fortune Brands for about £2.8bn in cash.

Allied issued a statement which said competition had been a keen factor in bringing the two firms together.

Analysts said Allied’s share price has lagged behind the offer price as the deal will still need approval from various regulators and will take many months to complete.

Pernod’s offer may lead to rival bids from other drinks companies, and other possible bidders may include Brown Forman, the owner of the Jack Daniel’s brand, or Constellation Brands.

Pernod initially looked at an Allied bid in 1999, but it coincided with Philip Bowman’s take over as Chief Executive of Allied, which prompted a dramatic improvement in financial performance.

(CD/GB)