The Wall Street Journal-20080125-Vin - Sprit Bidding Under Way- Two Swedish Firms- Pernod Make Offers For Absolut Owner
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Vin & Sprit Bidding Under Way; Two Swedish Firms, Pernod Make Offers For Absolut Owner
After more than a year of waiting, bidding has finally begun for one of the biggest trophies of the global liquor industry: Vin & Sprit AB, owner of Absolut vodka.
The Swedish government, which owns Vin & Sprit, closed the first round of bids yesterday, according to people familiar with the situation. The bidders' names weren't made public, but the chief executive of drinks giant Pernod Ricard SA, Pierre Pringuet, said his company had submitted a nonbinding offer.
Two Swedish companies -- private-equity firm EQT Partners AB and Investor AB, the main investment vehicle of Sweden's Wallenberg family -- also made a joint offer, according to a person familiar with that bid.
Absolut is the world's third-largest premium liquor in terms of volume, after Diageo PLC's Smirnoff vodka and Bacardi Ltd.'s Bacardi rum, and could be valued at $5 billion to $6 billion, analysts have said. The election of a center-right government in Sweden in 2006 opened the way for the sale.
The current turmoil in global financial markets won't affect the sale because Absolut "has such a strong brand," government spokeswoman Mia Widell said.
The government plans to winnow initial bids to a handful and hold a second round of bidding in about six weeks, which is expected to be completed in the first half of the year.
The disposal of V&S would continue global consolidation in the liquor industry. Over the past several years, Allied Domecq was sold to rival Pernod Ricard, Grey Goose vodka to Bacardi, and Glemorangie Scotch to LVMH Moet Hennessy Louis Vuitton SA.
Bacardi, Diageo and Fortune Brands Inc. have long been expected to join the auction for V&S. Spokeswomen for Bacardi and Diageo declined to comment. A spokesman for Fortune couldn't be reached yesterday.
Fortune is regarded as a potential front-runner because it already distributes Absolut in the U.S. and is part of a joint venture with V&S to distribute the vodka overseas. If any other player buys Absolut, it will have to pay a penalty to break the distribution agreements; Dresdner Kleinwort estimates that could cost as much as 300 million euros ($443 million). Since Fortune wouldn't have to pay such penalties, it could potentially afford to pay a higher price for V&S.
Absolut would help Pernod Ricard expand in the U.S., where it is currently the No. 4 competitor by volume, and one-third the size of market leader Diageo.
Separately, Pernod Ricard said revenue for its second quarter ended Dec. 31 totaled 2.16 billion euros, up 5% from 2.05 billion euros a year earlier.
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Geraldine Amiel contributed to this article.
