France's Pernod Ricard looked set to buy drinks group Allied Domecq for £7.6 billion, analysts said, as potential rival bidder Constellation Brands pulled out of the running.
Analysts now expect Pernod's bid to succeed although it still has to get clearance from European Union and US regulators before it can split up Allied's drinks brands between itself and its partners.
Pernod shares jumped more than two per cent on relief the French spirits giant would not be forced to pay more in a bidding war with Constellation, while Allied shares slipped as the only credible possible rival bidder pulled out.
Lehman Brothers analyst Ian Shackleton said he expected the Pernod deal to go through, although it might be delayed by US regulators looking at the deal's implication for the gin and American whiskey market in the United States.
"This should now leave the route clear for Pernod Ricard and Fortune Brands to secure the deal," said analyst James Dawson at UK broker Charles Stanley.
Allied shares were off 1.8 per cent at 679-1/2 pence by midday in London, while Pernod shares rose 2.5 per cent to €135.80, making its Allied bid worth 688p, or £7.6 billion.
Britain's takeover panel had given Constellation, the world's biggest wine group and owner of Mondavi, until June 29 to make a bid with its partners Jack Daniel's maker Brown-Forman and private equity groups Lion Capital and The Blackstone Group.
Constellation's chief executive Richard Sands was in London earlier last week trying to drum up support for a bid. However, later in the week in the United States, Mr Sands pulled out, saying he did not see sufficient value in Allied to make an offer.
Analysts said the decision by the world's biggest spirits group Diageo to throw its weight behind the Pernod camp in its Allied bid, rather than back Constellation, was key.
"Without Diageo on board it was always going to be tough to finance a bid. There were not the market synergies of the Pernod deal and there were problems with the Allied pension fund, so there was just too much to make this fly," said Mr Shackleton.
Earlier this month, Diageo teamed up with Pernod and agreed not to talk to any third parties over an Allied bid in return for buying Pernod's Bushmills Irish whiskey and Allied's Montana New Zealand wines for just over £500 million. Pernod, home to Chivas Regal whisky and Martell cognac, first struck a deal in April to buy Allied along with Jim Beam bourbon making partner Fortune Brands for 545p a share in cash and 0.0158 new Pernod shares for each Allied share.
The two groups agreed to split up Allied's brands with Pernod taking Ballantine's whisky, Beefeater gin and most of Allied's wines, with Fortune picking up Sauza tequila, Kahlua liqueur and Maker's Mark bourbon.
The EU is set to rule on the deal on June 24, while Fortune needs regulatory clearance from the Federal Trade Commission in the United States, which is expected in July.
Analysts said the FTC will look carefully at Pernod's market share in the US gin market as it will own Seagram's gin and Beefeater, and also at Fortune's market share in American whiskey where it will own Jim Beam and Maker's Mark.
If they get the go ahead, which analysts say is likely, Allied's shareholders are set to vote on the deal on July 4. Pernod and Fortune anticipate the deal closing by July 26.
"There is no longer any uncertainty," a Pernod spokesman said. "This is good news for the employees, suppliers and shareholders of Allied Domecq."
"We've still got antitrust to get through and we've still got the Allied shareholders meeting," said one person close to the deal. "But with the other side out, it should be a free run."