Allied's Sweetener Backfires

Suitors who look attractive late at night "after a glass or two seem a lot less appealing in the cold light of day", says Lex in the FT, after Constellation Brands withdrew any prospects of bidding for Allied Domecq. Not that it stood that much of a chance to bag Allied: with rival Pernod Ricard teaming up with Diageo and Fortune Brands, and offering a robust deal to Allied, Constellation's chances were always slim.

So why did Pernod's deal look that much sweeter than Constellation's? For one, Pernod had worked hard with its bid, sidestepping most competition concerns through its dealings with Fortune and Diageo, says Lex. Moreover, Constellation's proposal, which valued Allied at 720p a share, and consisted of 608p of cash and shares in Allied's wine business, was conditional on a likely extension to the bid deadline and help from Allied with the relisting, says Simon Nixon on Breakingviews.com.

But the main thorn in the side of the Constellation bid was Allied's "curious plan" to issue a press release which gave a "running commentary" on the bid, even though no such announcement was ever necessary as Constellation's bid had never been formalised. The press releases are believed to be a "cack-handed attempt" attempt to frighten Pernod into offering more for Allied. Constellation warned it would withdraw its bid if Allied issued the press release and did so following news that its proposal had been leaked to the Financial Times.

So with Constellation out of the running, a number of uncertainties remain: both US and European authorities need to give the deal the thumbs up, as do the shareholders. Yet "barring surprises", says Lex, this deal should be sown up by the end of next month.