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FTC blocks bid for Seagram's drinks
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October 23, 2001: 4:23 p.m. ET
U.S. regulators cite concerns over competition in rum business.
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NEW YORK (CNNmoney) - The Federal Trade Commission authorized its staff Tuesday to block the joint $8.15 billion acquisition of Seagram's drinks business by Britain's Diageo Plc and France's Pernod Ricard.
The agency cited concerns about competition because Seagram and Diageo are the No.2 and No.3 sellers of rum in the U.S., following leader Bacardi U.S.A.
Bacardi and Diageo/Seagram would control a duopoly created by the merger. The two firms would also be able to engage in coordinated interaction that could further injure competition, the FTC contends.
"The proposed merger would consolidate the second- and third-largest U.S. rum producers, leaving only two large sellers of rum in the United States," FTC Bureau of Competition Director Joe Simons said in a statement. "This will create a dangerous likelihood of reduced competition and higher prices for consumers of rum."
The FTC authorized its staff to seek a federal district court order to stop the acquisition.
Last December, Britain's Diageo (DEO: down $1.00 to $39.20, Research, Estimates) and France's Pernod Ricard agreed to buy and divvy up Seagram's wine and liquor businesses for a total of $8.15 billion cash. The Britain-based food and beverage company would pay $5 billion for several Seagram brands, including Captain Morgan Rum, Crown Royal, VO and Seagram's wine businesses. Pernod Ricard has agreed to pay $3.15 billion for Chivas, Glenlivet and Martell brands from the portfolio.
The joint acquisition of Seagram's drinks business also wouldn't create any efficiencies, according to the FTC said. Further, it has been 18 years since a company that did not have a major rum brand introduced a new brand on a national scale. 
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