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Absolut for sale

Published:  23 July, 2008

By Ron Emler
The election of a new centre-right government in Sweden has
prompted speculation about the future of Absolut, the world's third biggest-selling vodka brand.

Absolut is owned by Vin & Sprit, the Swedish state wine and spirit monopoly, but the new government has pledged that it will sell state holdings in various companies as part of a

programme of economic liberalisation.

Pernod Ricard, the world's second-largest wine and spirits group, has already said it would be interested in Absolut. Pierre Pringuet, Pernod Ricard's managing director, said it would at least examine the details of any sale because of Absolut's size. 'The consolidation of the industry is going to

continue - it is inescapable,' he added.

Lehman Brothers, the investment bank, believes that a privatisation of Vin & Sprit could take place within the next 12 months. It suggested that Absolut, Vin & Sprit's biggest asset, could be worth between $3.7 billion and $4.8 billion (2-2.6 billion). Other commentators believe a sell-off would take longer, not least because the Swedish government has already said that the initial disposals will focus on companies

that have exisiting stock market listings, which Vin & Sprit does not. In addition, privatisation of Vin & Sprit would entail

political decisions about the future of the Swedish wholesale market. As a result, ownership of Absolut could take two to three years to resolve.

Despite Pernod Ricard's immediate expression of interest, analysts believe that Fortune Brands, the owner of Jim Beam bourbon, which recently beat the French group to take over Herradura Tequila, could be in pole position for Absolut because it is already a distribution partner of Vin & Sprit.

To complicate matters further, Pernod Ricard already distributes Stolichnaya vodka in the US and other markets, and has said it wants to buy the brand outright. Ownership of

the number two and number three vodka brands is though to be impractical because it would undoubtedly prompt severe scrutiny by competition authorities in Brussels and Washington. On the other hand, the potential sale of Absolut could give Pernod Ricard extra leverage in any negotiations

over Stolichnaya.