Diageo was forced to put the Malibu rum brand up for sale after it acquired Seagram, owner of Captain Morgan. The Allied Domecq deal settles a separate dispute between the two companies that arose last year over the issue of which of the spirits giants really owned rights to Captain Morgan.
Provided that the Malibu acquisition is completed successfully, Allied will withdraw the litigation it opened against Diageo over the ownership of the Captain Morgan brand.
Diageo has now signed a deal with the Distileria Serralles in Puerto Rico for the supply of rum to Captain Morgan.
Paul Walsh, Diageo's chief executive, said: "These transactions confirm Diageo's ownership of Captain Morgan and secure its long-term rum supply."
The sale of Malibu also means that US regulators will be satisifed that there is sufficient competition in the US rum market. With Malibu taking a 5% share of the US rum market, and Captain Morgan having a 21% share, there had been concerns that, along with Bacardi, which has a 51% share, a rum duopoly would have been created.
Allied expects that the acquisition will be earnings neutral in the 2003 fiscal year. Director of corporate affairs, Jane Mussared, said: "We are expecting sales to match the cost of the acquisition in the first year and then we will start to see profit.
"Malibu is a great brand. We got an excellent price for it and it has filled a gap in our portfolio."
In a separate deal, Allied Domecq has also bought Diageo's Mumm Cuvee Napa brand for £27.5m. The maker of sparkling wine joins the Mumm champagne brand which is already in Allied's portfolio.
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