Diageo may sell Malibu to save deal

MALIBU rum, spirit of choice for the 1980s Essex girl, was expected to go up for sale after US regulators blocked Diageo and Pernod Ricard's acquisition of Seagram's drinks business.

Those close to the negotiations expect Diageo and Pernod to offer to sell the label in order to assuage the US Federal Trade Commission's concerns about competition in the US rum market.

Regulators are worried about Seagram's Captain Morgan - No.2 in the US behind Bacardi - being owned by the group that produces Malibu.

Sources said Malibu was the FTC's major concern over the $8.15bn (£5.7bn) sale of Seagram's drinks division, so the companies would now offer to sacrifice the producer of 2.3m cases of rum a year. Less likely solutions could be to sell Captain Morgan or dispose of Parrot Bay rum.

Shares in Diageo opened lower but recovered to be up 3p at 686p. Pernod Ricard fell 3.2% in opening trade but recovered later to be down 1.9% at e76 .