The joint acquisition of Canadian drinks giant Seagram by Britain's Diageo and Pernod Ricard of France, was dealt a body blow on Tuesday by the US Federal Trade Commission.

The FTC gave a red light to the $8.15 billion (£5.7bn) deal on grounds that it created a serious competitive threat within the US rum market. The addition to Diageo’s existing rum portfolio of Seagram’s Captain Morgan and Myer’s brands would give the UK company 26% of the US rum market to the detriment of free competition, ruled the regulator.

However, the mega-deal is not yet quashed. Diageo, owner of Malibu coconut rum, is offering to sell the brand in a bid to appease the FTC.

The parties will meet again later this month to re-evaluate the situation in the light of Diageo’s offer. Says the latter’s chief executive Paul Walsh: “We are encouraged by the FTC’s willingness to have further discussions which we will pursue over the next few weeks.”

Meantime, also on Tuesday, Canada’s Competition Bureau okayed the Seagram purchase subject to Diageo selling its Canadian whisky, Gibson’s Finest, leaving it with Seagram whisky brands such as Crown Royal and VO.

News source: The Times (London)