The European Commission yesterday gave its conditional blessing to the merger between Guinness Plc and GrandMet, clearing one of the last hurdles in the way of the £24 billion deal. Guinness and GrandMet reacted immediately, saying they had agreed to meet the Commission's conditions within 15 months.
"We are pleased that we were able to put forward proposals that met the approval of the Commission," the companies' chairmen said in a joint statement released in London.
Market opinion was that the companies got off lightly, compared with other prospective merger participants.
Guinness shares rose 12p to 620p and GrandMet 11 1/2p to 620 1/2.
The Commission's conditions followed its belief that the merger could create or strengthen a dominant position in the spirits market, particularly in Greece, Spain, Belgium and Luxembourg, as well as in Ireland.
"Dewars is a major international brand whose divestment will address the concerns about the parties' strength in whisky markets in Greece and Spain," the Commission statement said.
Other commitments given by Guinness and GrandMet, which will be called GMG Brands after the merger, include the transfer to third parties of their distributorship of Gilbeys gin in Belgium and Luxembourg and to end their distribution agreements with third parties in respect of Wyborowa vodka in the same countries.
The two companies also agreed to end their distribution deal for Bacardi in Greece.
A Commission official said the commitments implied that amendments would have to be made to the deal concluded earlier this week between French luxury goods and drinks firm LVMH and the two British drinks giants, which ended months of wrangling.
"Considering the commitments given, there are things in this accord which do not hold water and they know it," he said.
Under the terms of the deal, an existing distribution joint venture between LVMH and Guinness would be extended to include GrandMet brands - J&B whiskey and Smirnoff vodka among others.
LVMH's chairman Mr Bernard Arnault said that the advantage of the extended venture was that his company would have operational control in 80 per cent of the countries where the distribution deal applied.
GMG Brands will create the world's largest beverages group, with turnover twice as big as its two nearest rivals, Canada's Seagram and Allied Domecq.
Analysts were expecting US authorities to clear the deal later yesterday also on condition that the group sell Dewars, the number one whisky brand in the United States.
But a spokeswoman for GMG said the group did not expect any word from the US authorities for several weeks.
Merrill Lynch drinks analyst Mr Philip Hawkins said: "This (the Dewars sale) would definitely have been their preferred solution and we have a fair value target of 625p-650p."
Dewars provides $50 million (£34 million) operating profit a year and is expected to sell for $500 million to $600 million (£340 million to £40 million).
