LONDON (Brand Republic) – Drinks giant Diageo, in collaboration with French company Pernod Ricard, has scooped Seagram’s spirits business in a £5.5bn deal.
Diageo paid £3.4bn and Pernod Ricard paid £2.1bn for the spirits and wines division. However, the deal is far from complete, with a legal challenge facing the new owners over the ownership of the Captain Morgan rum brand.
Destileria Serralles, the Puerto Rican makers of the rum, claims it has the rights to buy the brand. If the distiller wins the case, Diageo’s bid will be reduced by £1.2bn to compensate for the value of the Captain Morgan Brand.
Vin & Sprit, manufacturer of Absolut Vodka, is also yet to decide upon who should be awarded Seagram’s US distribution rights, while Diageo and Pernod Ricard could face an investigation by European and US anti-trust authorities.
However, the companies are confident that the structure of the deal should avoid regulatory scrutiny. They hope to close the deal by the end of March 2001.
Vivendi Universal, which has encompassed Seagram in a merger with Vivendi and Canal+, will benefit from the deal, pocketing about £5.25bn in after-tax proceeds. This will pay off Seagram’s £4.3bn debt and leave change.
Under the terms of the agreement, Pernod Ricard is expected to take Seagram’s Scotch whisky operation –- including Chivas Regal, Passport and Glenlivet single malt and Seagram’s Gin -– to its stable, which currently includes Ricard, Pastis 51 and Jameson’s Irish whiskey.
Diageo, which owns Johnnie Walker whisky and Smirnoff vodka, is expected to scoop Captain Morgan dark rum, Crown Royal and VO Canadian whiskies, and Seven Crowns American blended whiskey. The Sterling Californian wines division would be added to Diageo’s Napa Valley wine business. Seagram’s Martell cognac is to be sold off.
This article was first published on brandrepublic.com