The future of Diageo and Pernod Ricard's bid to buy up Seagram's wines and spirits empire could lie with the Malibu brand. The deal was blocked this week by US competition authorities but both Diageo and Pernod Ricard are confident that further talks will clear the way for approval in the next few weeks. Diageo chief executive Paul Walsh said: "We are encouraged by the US Federal Trade Commission's willingness to have further discussions which we will pursue over the next few weeks." The FTC was concerned at Diageo's potential dominance of the US rum market, along with the industry leader Bacardi, reducing it to two major players. "This will create a dangerous likelihood of reduced competition and higher prices for consumers of rum," said FTC competition chief Joe Simons. Although Pernod and Diageo were putting a brave face on this decision, it must be considered a serious setback as they expressly structured the deal in order to avoid any regulatory problems. Diageo looks set to auction off the 2.3 million case Malibu brand which should allow the deal to go ahead under competition rules. The sale would reduce Diageo's share of the US rum market to 19% from 26%. Both Pernod Ricard and Allied Domecq could be interested in acquiring Malibu. Early estimates have put the brand's value at £800m. Pernod Ricard's spokesman in Paris would not be drawn on this but said: "Malibu is a good brand. We will have to wait and see if it goes on sale. "We were prepared for the FTC's decision. It is just another stage we have to go through. I do not think it will be more than a few weeks before we reach a conclusion." It would be a good trade off for Diageo, but only if it is able to keep the Seagram rum brand Captain Morgan, which sells 3.6 million cases, most of it in the US. But its ownership of Captain Morgan is in dispute. A pre-emptive strike by Allied Domecq on the rum's Puerto Rican producer Distileria Seralles has led to a court dispute over its ownership. If Allied wins, Diageo would left without a strong rum brand. An Allied Domecq spokeswoman said: "This is still going through the judicial process but we believe we have the right of first refusal to bid for the brand." However, Diageo maintained Captain Morgan would be theirs once the Seagram deal went through. City analysts too were convinced that the Seagram deal would still go ahead in some form. One commented: "Indications are that it's slightly off course, but not off the road. It just won't be as much as was hoped, or as quickly." Gerrard drinks analyst David Liston said he believed the Malibu sale would go ahead but questioned whether Pernod could afford to buy it. He added: "I'm sure Diageo would rather keep the Captain Morgan brand and sell Malibu as it has more potential, for example in pre-packaged spirits." Pernod Ricard insisted it was committed to the disposal of its non core businesses, BWG and Oddbins, whatever the outcome of the Seagram deal. {{NEWS }}

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