Diageo gets Montana

Published: 23 July, 2008

Diageo has struck a deal to back Pernod Ricard in its acquisition of Allied Domecq. In return it gets to purchase Bushmill's Irish whiskey and is highly likely to get Allied's New Zealand wine brand Montana, in a combined deal worth more than 500 million.

The deal for Montana (estimated at 320 million, 11 times earnings) does not include the Corbans, Stoneleigh or Church Road wine brands, which will be retained by Pernod. The deal for Bushmills (200 million, 14 times earnings) gives the world's largest spirits company a presence in the Irish whiskey market for the first time. Pernod Ricard owns the market leader, Jameson.

Diageo has entered an 'exclusivity deal' with Pernod Ricard and will be unable to be part of a counterbid for the world's second-largest spirits company. In a statement, Diageo said it had 'undertaken to cease discussions with any third party in connection with any of the assets or businesses currently owned by Allied Domecq'.

Diageo had allegedly been in talks about being part of a Constellation Brands-led consortium.

Paul Walsh, chief executive of Diageo, said: '[Bushmills] is one of the industry's oldest Irish whiskey brands and gives Diageo, for the first time, an important presence in this growing category. Montana is one of the leading New Zealand wine brands and the number one New Zealand export brand. The option gives us the opportunity to establish whether it could deliver the same growth that we have seen from our existing wine business.'

Pernod Ricard has stated it expectd both deals to occur on

26 July. Both acquisitions would also be subject to regulatory clearance and are expected to close in late 2005 or early 2006.

A spokesman for Pernod added: 'This transaction provides Bushmills with the opportunity to grow under the ownership of Diageo while enabling Pernod Ricard to continue to focus on Jameson as its key brand in the Irish whiskey category. Assuming exercise by Diageo of the Montana option, Pernod Ricard will retain attractive New Zealand wine brands, which are complementary to its existing wine business.'

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