Allied issues threat over Guinness deal

Allied Domecq, the Beefeater gin and Ballantine's Scotch group, yesterday warned that it would make a formal complaint to the competition authorities if it felt that the proposed pounds 24bn merger between Guinness and Grand Metropolitan gave the enlarged group an unfair dominance in any of its markets. The company has set up a task force to consider the matter.

Though Allied Domecq's chairman, Sir Christopher Hogg, was keen to play down the possible impact of the deal yesterday. He said: "If there is a regulatory issue in particular markets then we will have a duty to make a complaint. But it is much too early to predict what will happen. The jury is out."

The company's low-key approach contrasts with a strong attack launched on Monday by Seagram, the Canadian spirits group which owns the Chivas Regal and Mumm's champagne brands. It said the deal raised "serious anti- trust issues" in the US, Europe and elsewhere. It is understood the company may consider legal action to stop the deal.

There was speculation yesterday that prior to the announcement of the GrandMet deal, Guinness had been talking to Bacardi about a possible link- up. That deal would have given Guinness the world's leading brand of spirit to link with its existing top 10 brands, Johnnie Walker Scotch and Gordon's gin. Guinness said it did not comment on market rumours though one insider said the link-up was unlikely.

UK retailers as well as pub and brewing groups remain relaxed about the possible implications of the Guinness-Grand Met deal even though the new company will have huge market shares in certain markets, particularly in Scotch and gin. Whitbread, Bass and Sainsbury's all said the UK impact would be minimal.

In Scotland, the largest whisky union, GMB Scotland, will today demand that United Distillers honour its agreement of long-term employment security if Guinness, its parent company, completes the merger. Guinness recently renewed a job security deal covering 3,000 unionised members of its 4,250- strong Scottish workforce, preventing compulsory redundancies until 1999.

Harry Donaldson, of GMB Scotland, said: "All too often mergers are about rationalisations and redundancy. The whisky industry especially has had more than its share of morale-sapping cut-backs. We want a merger with a difference - for growth and jobs."

Other reaction from north of the border was muted. George Reid, the Scottish National Party's trade and industry spokesman said they were "reasonably comfortable" with the proposals, which offered the prospect of growth in developing markets such as the Far East. However, he warned they would seek assurances on jobs.

Allied Domecq declined to say whether it planned to lobby the Government to have the merger ruled upon by the British competition authorities rather than those in Brussels.

Allied's shares rose 17p to 463.5p yesterday in spite of a flat set of profit figures as City analysts cited it as a takeover target. However, Tony Hales, chief executive, dismissed suggestions that the creation of such a dominant number one player in GMG Brands would force Allied to strike a deal itself. "Everybody wants to be number one. But we're damned happier to be number two than number five or six. And that is where the real squeeze is going to be."

Allied Domecq's problems were further highlighted yesterday when it announced a modest 3 per cent increase in half-year profits to pounds 317m and a maintained interim dividend of 9.44p.