The two buyers had expected the £5.2bn bid to go through after Diageo offered to sacrifice its Malibu brand for the deal.
The US Federal Trade Commission blocked the bid last month over fears that Diageo, the third-biggest seller of rum in the US, and industry leader Barcardi would monopolise the US rum market.
The Malibu sale makes sense for Diageo, because the rum brand has a 5% US market share, whereas Seagram's rum brands, including Captain Morgan, occupy a 21% share of the market. However, rival Bacardi will still dominate the sector with a 51% share.
Companies interested in the Malibu brand, worth an estimated £650m-£750m, include Seagram's partner Pernod, Jack Daniel's maker Brown-Forman and Jim Beam bourbon company Fortune Brands. UK spirits company Allied Domecq is also expected to make an offer for the brand, following disputes over the ownership of rival rum brand Captain Morgan.
Allied is currently contesting the control of Captain Morgan with Seagram and Diageo in the Puerto Rican courts, after it struck an alliance with rum supplier Destileria Serrelles for control of the brand. The supplier claims that the Seagram/Diageo Pernod deal triggers a change-of-control clause that would allow it to take control of the brand and sell it to Allied.
Allied CEO Philip Bowman is expected to offer to buy Malibu in return for withdrawing his claim to ownership of Captain Morgan. However, Diageo is confident that Allied will lose the court battle and it is believed that Pernod will be the early favourite in the Malibu bid.
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This article was first published on brandrepublic.com