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Diageo, FTC to hold talks
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October 24, 2001: 8:41 a.m. ET
UK drinks company Diageo, Pernod of France to talk to FTC over Seagram deal
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LONDON (CNN) - The Federal Trade Commission has agreed to hold further talks with Diageo and Pernod-Ricard after rejecting their bid for Seagram's drinks unit.
The United States Federal Trade Commission (FTC) voted on Tuesday to block the $8.15 billion sale of the Seagram drinks units citing concerns the deal would reduce competition on the U.S. market for rum.
The FTC expressed fears the British drinks group Diageo, the third largest rum seller in the U.S., would create a duopoly with industry leader Bacardi if it were allowed to purchase Seagram, which is the country's second largest seller.
The decision to block the sale puts U.S. officials at odds with the European Union, which approved the sale in May. It is not the first time the transatlantic competition authorities have disagreed.
The European Union rejected General Electric's planned $42 billion acquisition of Honeywell International last July for similar reasons, marking the first time a proposed merger between two U.S. companies was blocked solely by European regulators.
U.S. regulators had already approved the purchase, with minor conditions, but EU regulators had concerns General Electric's huge market power in aerospace products and engines would prove anti-competitive.
Diageo, formed in 1997 by the GrandMet and Guinness merger, is confident the deal has a future.
Diageo's chief executive, Paul Walsh, said: "We are encouraged by the FTC's willingness to have further discussions which we will pursue over the next few weeks."
In a move to assuage U.S. competition concerns, Diageo said it may consider selling its Malibu rum brand to save the deal.
Diageo Media Relations Manager Isabelle Thomas told CNN: "We are waiting for the full analysis of the decision by the FTC before considering all options including the possibility of selling Malibu, among others."
Seagram's owner Vivendi Universal pressed long and hard for the trade sale last December of the Canadian firm's drinks portfolio, aiming to develop its entertainments assets.
Canadian authorities gave the merger a green light on the condition Diageo would sell its Gibson's Finest whisky brand.
Vivendi Universal Executive Vice Chairman Edgar Bronfman on Tuesday publicly expressed his confidence the deal would go ahead by December 31 -- a position shared by all three companies.
David Liston, analyst at investment bank Gerrard in London, told CNN: "Vivendi will be very keen to sell Seagram's business since they have transformed into a pure media company. Pernod is very keen to do the deal as it really enhances their position in the world's spirit market.
"Diageo would love to do the deal but it's not nearly so important for them because they've already got a strong brand portfolio." 
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