USA TODAY - Absolut sale: Vodka-maker sold for about $9B

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STOCKHOLM
By Karl Ritter, Associated Press Writer

French liquor group Pernod Ricard outbid three other companies to buy Sweden's state-owned Vin & Sprit, the maker of Absolut vodka, for $8.89 billion, the company said Monday.

The deal ends months of speculation over who would take over one of the world's biggest vodka brands, which was put on the auction bloc as part of a sell-off of state-owned companies.

Absolut is the world's fourth best-selling international spirit brand behind Diageo's Smirnoff vodka, Bacardi rum and Diageo's Johnnie Walker scotch.

Managing Director Pierre Pringuet said the acquisition will fill a strategy gap for Pernod Ricard, which didn't previously have any premium vodka brands in its portfolio.

"We wanted to bolster our presence in the U.S. and Absolut, with its 5 million cases will definitely do that," Pringuet told reporters in Stockholm, referring to Absolut's yearly sales of 9-litre cases of vodka in the U.S.

"We intend to develop the brand and if possible accelerate its strengths," he said.

The world's second-largest wine and spirits company beat the favorite, Jim Beam bourbon maker Fortune Brands (FO), to win control of one of the biggest and fastest-growing spirits brands half of which is sold in the United States.

It also beat Bacardi and an investment group controlled by Sweden's Wallenberg family.

Analysts at HSBC hailed it as a "master stroke", but said the high cost of the deal proved there were no cheap opportunities left in the fast-consolidating drinks sector.

The French company said it will buy Vin & Sprit for $6.05 billion plus 1.45 billion euros and assume outstanding debt of 346 million euros, giving the deal an enterprise value of $8.89 billion, using Friday's exchange rate.

The Swedish government, using an average exchange rate over the past 30 days, said the deal was worth 55 million kronor or $9.24 billion.

"Pernod Ricard submitted an offer that on an overall assessment is the most attractive," the government said. "Pernod Ricard will be an excellent home for V&S. The board of V&S has expressed that they see significant industrial logic in the transaction."

The government said the French company owner of brands such as Chivas Regal whisky, Mumm champagne and Beefeater gin intends to keep Vin & Sprit and Absolut vodka based in Sweden.

"There is no written contract about that but the value of the brand is because it is Swedish," Pernod Ricard Chairman Patrick Ricard said. "A Swedish brand must be produced in Sweden."

The government said the deal includes the whole company, except for Vin & Sprit's 10% share in U.S. spirits company Beam Global Spirits & Wine, which would be sold under a previous agreement with Beam shareholders.

The deal will be completed during the summer.

With its range of flavors from peach to blackcurrant, Absolut is the premium brand in Vin & Sprit's product range. Its other brands include Cruzan rum, Plymouth gin, a handful of Scandinavian aquavits and bitters and hundreds of wines.

Absolut is believed to represent roughly half of the company's sales of $1.48 billion in 2006.

Pernod Ricard said the deal would generate synergies estimated at $197 million to $237 million annually before taxes, partly by integrating distribution networks.

"These synergies should be put into place in between two-four years after the finalization of this acquisition, depending on the timeline of distribution accords," the company said.

As a result of the deal, Pernod Ricard said it would end its distribution agreement with vodka brand Stolichnaya, or Stoli.

Contributing: Reuters

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