The US Federal Trade Commission yesterday blocked a $8.1bn (£5.8bn) bid made by the UK drinks company Diageo and Pernod-Ricard of France for Seagram.
The FTC fears that the deal would allow Diageo, the third-biggest seller of rum in the US, and industry leader Barcardi to monopolise the US rum market. The second biggest seller is Seagram's Captain Morgan rum brand.
Diageo agreed to put up $5bn (£3.5bn) and Pernod-Ricard $3.1bn (£2.3bn) for the deal. In addition to Captain Morgan Rum, Diageo would gain Crown Royal, VO and the wine business. Pernod-Ricard would receive brands such as Martell Cognac and Seagram's Extra Dry gin.
Paul Walsh, Diageo's chief executive, said, "We are encouraged by the FTC's willingness to have further discussions, which we will pursue over the next few weeks."
Edgar Bronfman Jr, executive vice-chairman of Vivendi Universal, said that his company "remains fully confident that the transaction will be cleared by the FTC".
"The question is not 'if' the transaction will close, it is a matter of 'when' -- which in any case is no later than December 31 2001. We remain completely confident that the specific issues raised by the commission will be resolved in a timely fashion," he said.
Seagram put the company up for sale in December 2000 following its takeover by Vivendi, the French communications and media company.