New bidder may challenge Pernod for Dunkin' Brands parent

by Jeff Gelski
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LONDON — Another wine and spirits company may bid for Allied Domecq P.L.C., further complicating the future of subsidiary Dunkin’ Brands, Inc., a quick-service restaurant business.

Pernod Ricard, based in Paris, offered £7.4 billion ($14.1 billion) for Allied Domecq, based in London, on April 21. The board of Allied Domecq agreed to the deal and recommended it to shareholders.

Then, Constellation Brands, Inc., Fairport, N.Y., said it might challenge the bid.

If either company takes control of Allied Domecq, Dunkin’ Brands soon could be up for sale again. Predictions on a possible selling price for Dunkin’ Brands have ranged from $1.5 billion to $2.3 billion.

Pernod Ricard, which owns such wine and spirits brands as Chivas Regal and Jameson, is interested in such Allied Domecq brands as Beefeater and Kahlua. Likewise, Constellation owns such brands as Corona, St. Paulie Girl and Robert Mondavi.

Constellation, the world’s largest winemaker, said it is at an early stage of evaluating its options with a number of potential partners.

"There is no certainty that this process will lead to an approach being made to the company," Constellation Brands said.

Philip Bowman, chief executive officer of Allied Domecq, said April 21, "Media speculation has suggested that other offers for the company might emerge, and I would emphasize that were this to occur, the board, of course, retains an overriding fiduciary duty to consider any other serious proposal."

Allied Domecq on April 21 reported its financial results for the first six months of the fiscal year. Dunkin’ Brands turned in a 36% increase in trading profits, while system-wide sales were up 15%. Dunkin’ Brands comprises three brands in Dunkin’ Donuts, Baskin-Robbins and Togo’s.

Dunkin’ Donuts, with more than 5,500 retail outlets worldwide, reported a 15% increase in global system-wide sales during the recent six-month period. Same-store sales in the United States were up 8.1% as two new breakfast sandwiches experience sales success.

Published reports say Pernod Ricard would sell Dunkin’ Brands if it prevails in its bid to purchase Allied Domecq.

Pernod Ricard, if its bid is successful, already has agreed to sell certain Allied Domecq assets, including the Canadian Club brand, to Fortune Brands, Inc., Lincolnshire, Ill. The Pernod Ricard deal with Fortune Brands does not include Dunkin’ Brands.

Pernod Ricard has scheduled a shareholders meeting for the end of June. An Allied Domecq shareholder and court meeting will take place about the same time.

Under the Pernod Ricard offer, Allied Domecq shareholders would receive 545 pence ($12.85) in cash and 0.0158 new Pernod Ricard shares for every Allied Domecq share.

Allied Domecq has agreed to pay Pernod a £37 million "break fee" if a competing offer made within six months is successful.

Shares of Allied Domecq were trading below $42 per share on the New York Stock Exchange at the beginning of April. Shares were quoted at $52.80 in early afternoon trading today, up $1.32 or 2.56% from Tuesday’s close.

The companies involved:

• Allied Domecq P.L.C. — The board of the London-based company has accepted a bid from Pernod Ricard and recommended it to shareholders.
• Constellation Brands, Inc. — The world’s largest winemaker, based in Fairport, N.J., may make a separate bid for Allied Domecq.
• Dunkin’ Brands Inc. — A subsidiary of Allied Domecq, the quick-service restaurant business is comprised of Dunkin’ Donuts, Baskin-Robbins and Togo’s. Dunkin’ Brands formerly was known as Allied Domecq Quick Service Restaurants.
• Fortune Brands, Inc. — Pernod Ricard has agreed to sell certain Allied Domecq wine and spirits brands to Fortune Brands, Inc., based in Lincolnshire, Ill., for about £2.8 billion in cash. This deal is contingent on Pernod Ricard successfully purchasing Allied Domecq.
• Pernod Ricard — The Paris-based wine and spirits company has bid £7.4 billion ($14.1 million) to purchase Allied Domecq.

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