Pernod Ricard Buys Absolut Vodka Maker

French liquor group outbid three other companies to buy Sweden's state-owned Vin & Sprit for $8.89 billion.

STOCKHOLM, Sweden (AP) -- French liquor group Pernod Ricard SA outbid three other companies to buy Sweden's state-owned Vin & Sprit, the maker of Absolut vodka, for euro5.63 billion (US$8.89 billion), the government 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.
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 government said it selected Pernod Ricard's bid on Sunday over three other offers, by liquor groups Fortune Brands and Bacardi Ltd. and an investment group controlled by Sweden's Wallenberg family.
''Pernod Ricard submitted an offer that on an overall assessment is the most attractive,'' the government said in a statement. ''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 percent 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 10.35 billion kronor (euro1.12 billion; US$1.48 billion) in 2006.
Pernod Ricard said the deal would generate synergies, estimated at euro125 million-euro150 million (US$197-US$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 in a statement.
As a result of the deal, Pernod Ricard said it would end its distribution agreement with another vodka brand, Stolichnaya.
The French company said it will buy Vin & Sprit for US$6.05 billion plus euro1.45 billion and assume outstanding debt of euro346 million, giving the deal an enterprise value of euro5.63 billion (US$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 (euro5.86 billion; US$9.24 billion).
The government said last year it would sell Vin & Sprit as part of a broader sale of state assets in a move to pay off the country's debt.
The state sellout also includes assets in banking group Nordea AB, telecom TeliaSonera AB, Nordic bourse operator OMX AB, real estate company Vasakronan AB and mortgage lender SBAB.
Associated Press writers Malin Rising in Stockholm and Jenny Barchfield in Paris contributed to this report.
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