In Turnabout, Martell to Back Bid From Grand Met

French cognac house Martell et Cie reversed itself Tuesday and said it now favors a takeover bid by British hotel and drinks concern Grand Metropolitan PLC instead of one by Seagram Co. of Canada.

The decision could end a monthlong battle between Grand Met and Seagram for control of one of France’s leading cognac makers. But the Martell statement did not rule out the possibility that the French company could consider a higher offer from Seagram if one is made.

All the members of Martell’s board and other controlling shareholders have agreed to tender their shares to Grand Met, which is offering about $589 (3,300 French francs) per share, the Martell board said in a statement.

Grand Met already controls 20% of the cognac company.

“It is, at this time, the highest bid,” the Martell board said.

Seagram’s latest bid was about $531 (2,975 francs) per share.

Martell Chairman and family head Rene Firino-Martell had clearly said he was supporting the Seagram bid because the Canadian group would respect the traditional family structure.

But sources within Martell said some of the 51 family members no longer involved directly in the company were less concerned with tradition and following the lead of Firino-Martell than accepting the highest bid. Firino-Martell had promised to sell the business to Seagram.

“On a human basis, Mr. Firino-Martell has an opinion that is not necessarily similar to that of all family shareholders,” added one Martell source, declining to be identified. “It is difficult to keep so many shareholders under control.”

Seek Controlling Interest

Grand Met’s bid puts a total value on Martell of about $893 million (5 billion francs), while Seagram’s offer values the cognac maker at about $804 million (4.5 billion francs).

Both rival bids cover all Martell’s outstanding shares and convertible bonds and are aimed at obtaining at least 50.01% of Martell’s capital. Martell has 1.4 million outstanding shares.

A spokesman for Seagram declined to say whether the Canadian company is considering raising its bid in response to the Martell statement.

However, a Grand Met spokesman said his group was delighted with the news, which he said removed the possibility that Martell would follow its first inclination and simply accept the Seagram offer. Either way, Grand Met would profit, he said.

“Either we now gain Martell, which is our prime objective, or we see an after-tax profit of just 40 million pounds ($76 million) on our shares,” he added.

Both rival offers are set to expire on Feb. 19.