ref="http://www.cityam.com/company/diageo">DIAGEO could be in for an epic struggle to cherry pick top brands including Jim Beam from US conglomerate Fortune.
Sources close to the US firm say its management is determined to hang onto the drinks business after splitting the firm in three.
Fortune announced it will separate its most profitable drinks division from its home & hardware and golf arms, both of which it plans to spin off.
An industry source told City A.M.: “The management have said they want to spin off the other divisions but hold onto drinks. They feel they can grow the value of that part of the company and if they are reluctant to sell, a deal could be difficult.”
However, analysts remain confident the Beam Global Spirits & Wines business will not remain independent for long, with other industry rivals also eyeing its prized assets. Sources close to Diageo hinted it would be interested if regulatory hurdles could be overcome.
Although Diageo could comfortably afford to snap up the entire drinks division, which has an estimated value of $8.7bn (£5.5bn), competition issues mean it is far more likely to team up with another drinks retailer.
Simon Hales of Evolution Securities says an auction involving Diageo and Bacardi is the most likely scenario, circumventing conflicts with the Guinness owner’s distribution deals with LVMH Moet Hennessy on cognac and Casa Cuervo for Jose Cuervo tequila.
The brands likely to interest Diageo most, including Jim Beam and Maker’s Mark bourbon, would set the firm back around $5.5bn.