Allied goes to Pernod

News late last week reported that Constellation brands had called off its bidding for Allied Domecq, clearing the way for Pernod Ricard to buy Allied and create the world's second largest drinks group.

Tucked into a story in the FT weekend edition were details of the previous Constellation bid that would have spun off Allied's wine business , (which includes several important Spanish brands) to create a new publicly traded company. Among other issues, the two sides did not agree on the possible valuation: Constellation put it at 1.9 billion pounds (US$3.5 billion) and Allied at 1.7 billion pounds (US$3.1 billion). The move would have saddled the new wine group with the highest level of debt among rival wine groups. Who knows what that might have meant for the wine-buying consumer: a company hungry to boost sales, cutting prices to move product, or an indebted company, forced to raise prices to pay off the loans. I would have guessed the former, but its all irrelevant now... the deal didn't happen.

The Allied - Pernod deal should win EU merger approval. It must also be approved by the US and, above all, by Allied's shareholders.

And then, if the deal is approved, Allied's wines will be managed, for the most part, by Pernod Ricard. Maybe this is how the French intend to recapture the lead in the wine world, through mergers and acquisitions!