Absolut vodka primed for sale

Published: 23 July, 2008

By RON EMLER

The Swedish government has effectively fired the starting gun in the race to buy Absolut vodka.

Just before Christmas, Stockholm confirmed that it will privatise Vin & Sprit, the Swedish wine and spirit company that owns and produces the world's number-three brand, during 2007. Industry observers believe this will trigger a new round of consolidation among global wine and spirit producers.

The new centre-right government in Sweden will need to obtain parliamentary approval before it can sell off six companies, including Vin & Sprit, but this is seen as a formality. Once listed on the Stockholm stock market, the company, which has a large wine importation and distribution business in Sweden, would be vulnerable to a takeover bid.

Bidders likely would be interested in Absolut rather than the import and retail interests, which could either be split before privatisation or divested following a takeover. On its own, Absolut is reckoned by City bankers to be worth about 3 billion.

Already, Pernod Ricard has said that Absolut is so attractive that it would have to at least consider bidding for the brand, and Diageo is said to have indicated that it should not be ruled out of any auction simply because it owns Smirnoff, the world's best-selling vodka. The British company, however, would face competition worries in Brussels and Washington. Other interested groups include Fortune Brands, Constellation, Brown Forman and Bacardi.

The potential fight for Absolut also raises further questions about the Maxxium consortium, of which Vin & Sprit is a member. Rmy Cointreau has already said that it is leaving the four-member grouping by 2010, and a further dilution of the portfolio would present more problems for the remaining members, Jim Beam Global and the Edrington Group, which owns the Famous Grouse.

Meanwhile, Pernod Ricard is believed to be close to taking ownership of Stolichnaya vodka, the brand for which it owns distribution rights until 2010 as a result of the 2005 takeover of Allied Domecq. Pernod's head in the US has reportedly said it is relatively confident' of buying the brand soon from SPI Group, the Russian company that owns it.

If Pernod did acquire Stolichnaya, it too would face competition hurdles before being allowed to own Absolut.

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