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By Geraldine Amiel and Ian Edmondson

Of DOW JONES NEWSWIRES

PARIS -(Dow Jones)- French wine and spirits company Pernod Ricard SA ( 12069.FR) acquired Swedish state-owned Vin & Sprit, maker of Absolut vodka, for EUR5.63 billion or 55 billion Swedish kronor ($9.24 billion) including debt, the Swedish government and the French company said Monday.

In a statement, Pernod Ricard said it will pay USD6.05 billion plus EUR1.45 billion, or EUR5.28 billion in total for V&S, noting that V&S' enterprise value of EUR5.63 billion includes EUR346 million outstanding debt.

"The price seems a bit expensive but Pernod had no choice, they had to buy a vodka brand. Russia's Stolichnaya was less expensive, a less mature brand so growth potential was higher than with Absolut, but Absolut grants Pernod a good exposure to the U.S. market," said a Paris-based trader who declined to be named.

The company's shares fell after the news and at 1040 GMT were trading down EUR2.90 or 4.3% lower at EUR65.15 in a negative overall market.

Since the start of the year, Pernod shares have lost around 14% as investors anticipated the cost of such a transaction, as well as the potential negative impact of slower growth in the U.S. and Western countries on Pernod's revenues.

The deal ends months of speculation over the 91-year-old vodka-maker's future, which is being sold as part of a larger Swedish privatization program to reduce government debt.

Pernod's acquisition of brand Absolut vodka is a "big bang" in the industry, Chief Executive Pierre Pringuet said during a conference call following Monday's announcement.

Pernod's Chief Financial officer Emmanuel Babeau added that Absolut was the " best asset" to fill the gap in Pernod Ricard's premium vodka product line. He said the acquisition will significantly strengthen the company's growth profile.

The company's return on investment and earnings per share are to be " favorably" affected, although the impact on EPS in the first year after the deal will be neutral.

Pernod also said the transaction will be financed through a new syndicated loan of EUR12 billion, which should cover the financing of the acquisition but also the refinancing of the company's existing bank debt as well as back- stopping of short maturities and should grant Pernod "sufficient headroom" under revolving facility.

The initial annual interest charge is estimated to be around 5%, Pernod's Babeau said.

Pernod Ricard's opening leverage will be at circa 6 times the new group's pro forma earnings before interest, taxes, depreciation and amortization or EBITDA, in line with leverage levels of the group after the Seagram and Allied Domecq transactions, it noted.

"Strong cash flow generation and strong EBITDA growth will allow for a fast deleveraging," Babeau said during the conference call.

Pernod Ricard will acquire the whole company, excluding V&S's 10% stake in Beam Global Spirits & Wine, Inc., Absolut's U.S. distributor owned by Fortune Brands Inc. (FO), which will be sold to Fortune in the coming months, Odell said.

Pernod will also exit the distribution network Maxxium "at the latest" two years after the closing of the V&S deal, at minimal contractual costs, Pernod's CFO said.

But the group could also exit Maxxium earlier if any deal allows it, a company spokesman, Francisco de la Vega told Dow Jones Newswires.

As for the distribution network Fortune, of which Pernod plans to exit by 2012 according to initial deals, the French company could also exit sooner, if a new deal allows it, de la Vega also said.

Already, Absolut vodka should be distributed by Pernod's own networks where Maxxium and Fortune are not active, such as in Greece and in Israel, de la Vega said.

The French wine and spirits company said it expects "strong" synergies of EUR125 million to EUR150 million before taxes and that the impact of the acquisition on its net profit should be neutral for the first year, then " significantly positive" thereafter.

Pernod's Babeau added that synergies are expected over two to four years, with a quarter of those synergies delivered in the first year, and that antitrust clearance and closing of the acquisition should take place in the summer of 2008.

Contrary to the merger with Allied Domecq, that took more time than initially planned to be digested, the acquisition of Vin & Sprit should be smooth since the Swedish company is "very much like one of our brand owners; they don't have their own commercial network that we would have to undo, such as with Allied Domecq," said Pernod's de la Vega.

"This acquisition represents an exceptional opportunity for Pernod Ricard and creates the co-leader in the global wine and spirits industry," Pernod Ricard's Chairman Patrick Ricard said in a statement.

Pernod Ricard offered the best and highest bid and the Swedish company will continue to be based in Sweden after the transaction, the government said.

"We have received a very good price which will benefit (Swedish) households," Sweden' Financial Markets minister Mats Odell said. The sale's proceeds will be used to reduce government debt, he said.

Before the closing of the transaction, V&S will pay the Swedish government a dividend of EUR85 million, Pernod said.

Absolut is the world's third-largest premium liquor in terms of volume, after Diageo PLC's (DEO) Smirnoff vodka and Bacardi rum, and the deal will mean the end of Pernod's distribution deal with Russian vodka-maker Stolichnaya.

However, Pernod will continue distributing the Russian vodka over a short period of time to allow the Russian owner of Stolichnaya, SPI, to find a new distributor.

Until the Absolut deal, Pernod owned the global distribution rights of Stolichnaya, excluding Russia, and had been in talks with SPI and the Russian government for nearly three years to acquire the brand.

Vin & Sprit reported a net profit in 2007 of SEK1.47 billion on revenue of SEK10.31 billion. The sale is part of a larger asset sale by the Swedish State, which includes divesting stakes in telecommunications company TeliaSonera AB ( TLSN.SK) and Nordea Bank AB (NDA.SK), as well as selling fully state-owned mortgage company SBAB and property company Vasakronan. The government has already sold its stake in stock exchange operator OMX AB (OMX.SK) to Borse Dubai and Nasdaq (NDAQ).

Three other bidders took part of the due diligence process leading up to the binding bids, according to people familiar with the matter. U.S.-based Fortune Brands Inc. (FO), Bacardi International Ltd. of Bermuda, and Swedish private equity group EQT, working together with investment firm Investor AB (INVE-B.SK) were also interested in the distiller.

Companies Web site:

http://www.vsgroup.com

http://www.pernodricard.com

- By Geraldine Amiel, Ian Edmondson, Dow Jones Newswires; +33 1 40171740; geraldine.amiel@dowjones.com, ian.edmondson@dowjones.com; (Alice Dore contributed to this article)

  (END) Dow Jones Newswires
  03-31-08 0715ET
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