Out for Oddbins
Allied Domecq looks to be the favourite to buy Seagram's drinks business. But it is likely to cast Oddbin's aside. So who might take over the off licence chain? Julian Hunt reports
Poor old Oddbins. After spending all those years denying it was about to be bought by one of its rivals, the quirky off licence chain found itself put up for sale this week along with Seagram's entire portfolio of drinks brands.
As Vivendi, Seagram and Canal Plus captured the headlines with their three way merger proposal, those working in Seagram's $5bn global drinks business were told they were now part of a "non strategic asset".
While Seagram boss Edgar Bronfman insisted the company had not started discussions, he did admit there was plenty of interest from rivals keen to buy all or part of the business.
Bronfman favours selling Seagram's drinks arm whole rather than trying to break it up and flog the brands in separate deals.
Analysts say the break up option would generate far more cash, because Bacardi, Diageo, Pernod Ricard and Allied Domecq would be able to cherrypick Seagram's portfolio, which includes Chivas Regal whisky, Captain Morgan rum and Martell cognac, as well as distribution rights for Absolut vodka.
Such an auction could yield up to $10bn, they say.
Nevertheless, it would be a messy and protracted affair, and could leave Seagram with unwanted brands on its hands, which explains why the group is looking for one company to buy the business as a job lot.
And Allied Domecq has emerged as favourite to clinch the deal, with plenty of speculation it is already lining up a $7.5bn bid.
One analyst said: "It makes sense for Seagram to sell the whole lot at once and Allied Domecq could then sell on those brands it does not want to keep."
Although such a deal would stretch Allied's finances, it would be a massive coup for chief executive Philip Bowman who has made no secret of the fact he is keen to broker industry consoldiation largely through some sort of tie up with Seagram.
Allied would not comment on whether it was tabling a bid or had even opened talks.
But a spokeswoman said: "Philip Bowman has said that he believes that consolidation is necessary and inevitable and he would rather drive that consolidation than be driven. Allied always looks at all opportunities."
Reports from the States suggest the Bronfman family, which founded Seagram as a liquor business, is keen to buy it and take it private.
But most analysts believe Allied is best placed to clinch the deal. They say Diageo would face massive competition problems if it tried to buy the whole Seagram business, while the complicated family shareholding structures of Bacardi and Pernod-Ricard would make it hard for either of them to launch a bid.
Now for the really ironic bit.
If, as now seems increasingly likely, Allied did buy the whole Seagram drinks business it would also pick up Oddbins.
But Allied is no fan of drinks retailing. Only last year the group sold its half share in First Quench which runs the Thresher and Victoria Wine chains when it sold its pubs to Punch Taverns. So Allied would want to get rid of its new found retailing asset as quickly as possible. Question is, who would want to buy Oddbins?
A management buyout is one option, as is a bid from Unwins.
Another possible candidate is Majestic. But chief executive Tim How refuses to be drawn on whether his wine warehouse operation would enter the bidding.
And he laughed off the idea the two operations would be a good fit, saying it was still much too early to take a view on the fall out from this week's merger news.
But clearly one of the most the obvious candidates would be Parisa, the Booze Buster and Wine Cellar off licence chain headed up by the ebullient Nader Haghighi.
Those with long memories will know that he first tried to buy Oddbins way back in April 1996.
At the time, Haghighi was in charge of Greenalls' off licence operation which he later bought out and renamed Parisa and was one of those invited to bid for Oddbins.
Seagram had also circulated details to the big supermarket chains as well as to Whitbread and Allied Domecq, which back then owned Thresher and Victoria Wine.
Tesco and Greenalls soon emerged as front runners to buy Oddbins.
And it was widely rumoured they had hatched a novel plan under which Greenalls would take over the Oddbins sites, while Tesco would buy the name to run as an instore concession.
The talks broke down over the £54m that Seagram was demanding for its chain.
This overly ambitious pricing policy seems to have prevented a disposal ever since.
Although Seagram has always publicly insisted Oddbins was not for sale, the rumours have refused to go away.
Rumour has now turned into reality for Oddbins and those working in its 240 or so stores.
And the events of this week mean they now face many months of uncertainty.
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