Diageo and Pernod Ricard brought the protracted auction for Seagram's spirits business to an end yesterday with an $8.15 billion (€9.16 billion) agreed bid that promises to reshape the global drinks industry.

The deal was completed yesterday afternoon after all-night negotiations on the 100-page contract, but several issues surrounding the sale have yet to be resolved. The bidders face a legal challenge over the ownership of Seagram's Captain Morgan rum brand; the manufacturer of Absolut vodka has yet to decide who should inherit Seagram's US distribution rights; and Diageo and Pernod could face close scrutiny by European and US regulators.

The bidders said they had structured their bid to avoid regulatory problems and hoped to complete the acquisition by the end of March 2001. Diageo and Pernod now plan to dispose of dozens of the smaller Seagram brands, triggering an auction that Diageo estimated could raise $670 million. Industry executives said the disposals might attract interest from the losing bidders for Seagram Bacardi - Brown-Forman and Allied Domecq - as well as smaller industry members such as Remy Cointreau.

Allied has signed an agreement with Destileria Serralles, the Puerto Rican maker of Captain Morgan rum, which the British drinks group claims gives it right of first refusal over the coveted brand. Although Diageo, Pernod and Seagram said they were confident of defeating Allied's claim, the sale contract is understood to provide for compensation of at least $1.8 billion should Captain Morgan be excluded from the auction.

Absolut's future distribution remains unclear. Mr Peter Lagerblad, chief executive of Vin & Sprit, the Swedish group that owns the brand, said its US distribution would still be done by Seagram "in the short term". Diageo, which owns Guinness, will pay $5 billion of the purchase price and Pernod, the parent of Irish Distillers, $3.15 billion. Seagram's new owner, Vivendi Universal, will gain about $7.7 billion in after-tax proceeds.