Diageo set to drop Malibu to save deal

Related tags Captain morgan Pernod ricard Diageo

Drinks company likely to off-load spirit to comply with rulingIt is believed Diageo will off-load Malibu in favour of Captain Morgan in order to buy...

Drinks company likely to off-load spirit to comply with ruling

It is believed Diageo will off-load Malibu in favour of Captain Morgan in order to buy Seagram's wine and spirits business.

US regulators are concerned that Diageo would hold an unfair advantage through owning both Captain Morgan and Malibu. Last week regulators moved to block the proposed £5.7bn sale to Diageo and Pernod Ricard.

The Federal Trade Commission (FTC) issued a statement saying the deal would illegally reduce competition in the American rum sector, leaving only two large vendors.

The deal was cleared by both the European and Canadian authorities. But the FTC concluded unanimously that the combination of Seagram's Captain Morgan and Diageo's rum-based Malibu, the second and third largest brands in the US, would create a duopoly with Bacardi, the market leader.

The next largest rum seller in America has only a two per cent market share. No sizeable rum brand has been introduced to the US market for 18 years.

The FTC issued a preliminary injunction without filing a formal complaint. It is willing to have further discussions and both Diageo and Pernod Ricard believe a solution can be found.

Diageo chief executive Paul Walsh said he was encouraged by the FTC's willingness to hold further talks.

Patrick Ricard, chairman and chief executive of Pernod Ricard, said: "We are disappointed by the result but confident that an appropriate solution can be found."

It is understood Diageo would look to dispose of Malibu in favour of Captain Morgan to save the deal.

The decision means that Barcardi would no longer have to worry about facing a consolidated competitor.

Allied Domecq would be the most likely buyer for Malibu, but there is thought to be a valid argument over who has the rights to claim Captain Morgan. The second biggest selling rum in the world is made by Puerto Rican company Destileria Seralles and was licensed for distribution to Seagram.

Destileria claimed that the sale to Diageo meant the distribution rights reverted to itself and promptly did a deal offering those rights to Allied Domecq.

Related stories:

Seagram sale blocked in the US (24 October 2001)

Related topics Spirits & Cocktails

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