Fortune, Constellation cautious on Absolut

By David Jones and Martinne Geller

CHICAGO (Reuters) - Two big U.S. wines and spirits groups, Fortune Brands Inc. (FO.N) and Constellation Brands Inc. (STZ.N), said they are keen to acquire spirits brands but did not confirm any interest in the parent company for Absolut vodka.

Jim Beam bourbon group Fortune declined comment on Absolut after many analysts have put them as front-runner. The company already distributes the imported Swedish vodka in the United States.

Constellation, meanwhile, said the estimated value of the company as high as $6 billion was too pricey for it.

"In the spirits category, we are interested in acquiring under the right set of circumstances, but we are not commenting on Absolut," Fortune Chief Financial Officer Craig Omtvedt said at the Reuters Food Summit in Chicago on Wednesday.

While the world's biggest wines group Constellation, which owns Robert Mondavi wines and Effen vodka, has been an extremely acquisitive company in recent years, it said the prices being talked about for Absolut were too high.

"Current price estimates are nearing, if not over, $6 billion. At that level we are not interested in Absolut," Constellation Chief Executive Officer Richard Sands said at the same Reuters summit.

Sands said he believed the four front-runners for Absolut to be privately owned Bacardi, Britain's Diageo Plc (DGE.L), Fortune and Paris-based Pernod Ricard (PERP.PA).

VERY EXPENSIVE

"It's a very, very, very expensive proposition, and in my opinion we as a company are not in the most opportune position. The four companies that are talked about have a better chance of making a good opportunity at any price," Sands said.

Last week, Sweden's center-right government asked parliament to back the sale of the state-owned wines and spirits group Vin & Sprit, parent company of Absolut, but left options open as to when and how the sell-off will happen.

Analysts say Vin & Sprit could be worth $5 billion to $6 billion, with the key prize being Absolut, the world's second-best selling vodka after Diageo's Smirnoff. The U.S. market accounts for around half Absolut's worldwide volumes.

Fortune, which also sells home fixtures and golf equipment, bought Britain's Allied Domecq jointly with Pernod Ricard in 2005, adding brands such as Sauza tequila and Courvoisier cognac to its portfolio and pushing it to number four in the spirits world behind Diageo, Pernod and Bacardi.

Fortune's Omtvedt admitted that if Absolut "went away", then there would be a near-term impact and leave no vodka in the group's portfolio, but he would not comment on the financing of any potential Absolut deal.

Besides Fortune, Pernod Managing Director Pierre Pringuet said in December he would be keen on buying Absolut, while Bermuda-based Bacardi has also been reported to be interested.

But the four may face problems, analysts said. Diageo would come up against competition issues in combining Smirnoff with Absolut. Pernod is still trying to secure ownership of Stolichnaya vodka outside the brand's home Russian market as it has distribution rights only until 2010 outside Russia.

Bacardi, which also owns Gray Goose super premium vodka, may have to dust off plans for a flotation to raise the financing, while Fortune has a limited distribution network outside the United States, analysts said.