Allied Domecq in £7bn bid talks

SHARES in Beefeater gin giant Allied Domecq rocketed 18% today as it admitted being in talks that could see it taken over for more than £7bn in a joint bid by the makers of Jim Beam bourbon and Pernod anise.

France's Pernod Ricard and US conglomerate Fortune Brands are working on a takeover offer for the British company. The bid is being fronted by Pernod, with Fortune expected to help with the financing and carve out some of Allied's brands for itself.

News of the talks sent Allied shares surging 96½p to 633½p, adding more than £1bn to the company's stock market value.

Pernod is no stranger to joint bids, having teamed up with British rival Diageo in 2000 for the $8.5bn (£4.5bn) takeover of the Seagram drinks business.

Allied, run by Australian chief executive Philip Bowman, owns a host of best-selling spirits, ranging from Beefeater gin and Stolichnaya vodka to dozens of wines across the globe. It is the second-biggest spirits group in the world behind Diageo.

Although Diageo has repeatedly ruled out an outright takeover of Allied, it has said it might be interested in any brands to fall out of an Allied takeover. With its relatively small size compared with its British rival, Allied has been seen as a potential takeover candidate for more than a year.

There has long been speculation that Pernod may swoop, having seen strong benefits coming through from the Seagram deal.

The bumper takeover set alight hopes of a resurgent market for mergers and acquisitions in the City and brought the promise of big fees for City advisers.

Allied is being advised by Goldman Sachs, Pernod is using Morgan Stanley while Fortune has appointed CSFB for advice.

As well as its Pernod and Pastis 51 anise brands, the French bidder owns dozens of big-selling spirits and wines, including Jameson's Irish whiskey and Martell cognac. Its wines include Jacob's Creek, one of the best-selling brands in the world.

As well as Jim Beam, Fortune owns Knob Creek bourbon, DeKuyper cordials and the Dalmore single malt scotch.

Analysts said the deal could see Fortune looking at selling more of its spirits into the European market, while also snapping up a host of Allied's drinks brands. As well as benefiting Fortune's drinks portfolio, the joint carve-up could overcome potential competition issues around Pernod's new-found behemoth status. Fortune has held no direct talks with Allied, it is understood.

The American company is a diverse conglomerate, selling everything from homewares and office supplies to golfing equipment and has a stock market value of about £3.7bn. One of its stated aims has been to increase its presence in the wine and spirits market.