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Stakes Are High In Captain Morgan Rum War


February 1, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

"He who has the rum has the power."

The question of who will retain ultimate control of Seagram’s Captain Morgan dark rum–whether British drinks giant Diageo PLC or Puerto Rican distiller Destileria Serralles–is still up in the air.

Several weeks ago, Puerto Rico Federal Court Judge Juan Perez Jimenez granted Destileria Serralles additional time to gather evidence. Destileria Serralles’ argument is that Seagram is selling the assets of its wines and spirits business and not its capital stocks.

On the other hand, Seagram claims it contemplated the sale of the entire capital stock of Joseph E. Seagram and not the sale of its trademarks or any individual brands.

Seagram, owner of the Captain Morgan brand, has sold its wines and spirits business to the partnership of Diageo and Pernod Richard SA of France, who will pay $8.15 billion to buy Seagram’s drinks units, the world’s third largest spirits and wines operations.

Under the sales agreement, Diageo will acquire 61% of the assets of Montreal-based Seagram, with the remaining 39% going to Pernod Richard. Pernod is expected to take all of Seagram’s Scotch whiskies, including Chivas Regal and Glenlivet, Sandeman sherry and port, and some brandies and gins.

Meanwhile, Diageo is likely to take the North American whisky brands, a clutch of table wines and Captain Morgan.

Diageo’s existing brands include Johnny Walker, Guinness and Burger King, and Pernod Richard counts with Wild Turkey bourbon and Havana Club rum.

Destileria Serralles has taken Seagram to court alleging it has first refusal on repurchasing the brand once it’s sold. Destileria Serralles, the Puerto Rican rum producer from Ponce, is fighting for the rights to the Captain Morgan trademark and distribution.

Captain Morgan, the world’s second-best selling rum behind Bacardi, is estimated at selling close to three million boxes a year, mostly in the U.S. Revenue from rum taxes for fiscal year 1999 for the Commonwealth government were $270.3 million.

If the Puerto Rico Federal Court decides Diageo can’t have Captain Morgan, the price for Seagram will be cut by up to $2 billion.

The Seagram unit is being sold following a $30 billion merger of Seagram, Vivendi and pay television giant Canal Plus. The merger created Vivendi Universal, the world’s second-largest communication group behind the proposed pairing of America Online Inc. and Time Warner Inc.

Vivendi put the Seagram drinks division up for sale in the summer of 2000 to focus on its core business of entertainment and Internet.

Felix Juan Serralles Jr. presides over Destileria Serralles Inc. that produces and distributes most of the rums sold in Puerto Rico. While famous for its rum–particularly its flagship Don Q label–Serralles is much more than a rum producer. With annual sales of over $100 million in 1998, Serralles is a large industrial and marketing enterprise that produces and distributes more than 80 different product lines.

This Caribbean Business article appears courtesy of Casiano Communications.
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