London, Jan. 8 - Diageo Plc, the world's biggest alcoholic drinks group, believes it will face the toughest challenges to its bid for Absolut vodka, which is worth up to $7 billion, from antitrust regulators in Europe.
The group's Finance Director Nick Rose said the company would face challenges in two to three markets in continental Europe where the Swedish vodka Absolut and Diageo's own top vodka brand Smirnoff both have high market shares.
"We do see ways we could own the brand, making some assumptions on how regulators work," Rose told a briefing on Tuesday, but he did not identify the particular markets.
He saw less of a problem in North America where regulators tend to segment on price and where there is around a $5 a bottle difference in price between premium Absolut and Smirnoff, but in Europe regulators look more at overall national market shares.
Last month, the Swedish government kicked off the sale of state-owned Vin & Sprit, which owns Absolut, by sending out information packs on the business, and people close to the matter said four main players were set to submit bids by the end of January.
Diageo, French group Pernod Ricard, U.S.-based Fortune Brands and privately owned Bacardi are all set to make indicative bids, they said, while Sweden's Investor AB in partnership with private equity firm EQT has also said it is interested in bidding.
Absolut sells around 7 million 12-bottle cases annually, with 75 percent of sales in North America, and Rose said a key deal motivator was potential growth outside North America.
But he added that Absolut was not a must-have deal and was not of such strategic importance that Diageo, the group behind Johnnie Walker whisky, Baileys liqueur and Guinness beer, would abandon its strict financial discipline.
V&S was founded 90 years ago and is the crown jewel of a collection of Swedish state-owned assets currently up for sale.