Constellation Moves Closer to Bid for Allied Domecq

Constellation Brands Inc., which quietly became the world’s largest winemaker two years ago, took another step Friday toward challenging a $13.7-billion bid by France’s Pernod Ricard for Allied Domecq, the world’s No. 2 distiller.

Constellation, the only beer, wine and spirits company based in the United States, is teaming up with three partners to try to buy Allied, the British liquor company behind Beefeater gin and Stolichnaya vodka.

The consortium led by Constellation “has made a preliminary approach to Allied Domecq but there’s no certainty that this preliminary approach will lead to an offer,” the Fairport, N.Y.-based company said in a statement. It declined to reveal the value of its planned offer but analysts said they expected that it would top $14 billion.

Constellation’s more than 200 brands include labels from Napa, Calif., winemaker Robert Mondavi Corp., which it purchased for $1.3 billion in December.

Chief Executive Richard Sands, whose late father, Marvin, founded Constellation in 1945, usually leads takeover talks and has an iron-willed reputation for what he’s willing to pay.

Constellation’s partners are liquor maker Brown-Forman Corp., whose brands include Southern Comfort and Jack Daniels, and private equity firms Lion Capital and Blackstone Group.

Allied said the consortium’s proposal was “highly conditional” and “it is too early” to say whether it would turn into a firm offer.

“It’s just a preliminary approach but you’re looking at a 4% to 5% differential on the Pernod bid,” or upward of $14 billion, said Don Gher, who manages $650 million, including Constellation shares, for Coldstream Capital Management.

Allied recommended last month that its shareholders accept the takeover offer from Pernod, its smaller, Paris-based rival. The deal would create the second-largest liquor company and pose a more serious challenge to world leader Diageo.