The $37.3-billion merger of Grand Metropolitan and Guinness was cleared Wednesday by the European Commission after the companies agreed to give up some Scotch brands in Europe, paving the way for the creation of the world's largest liquor company.
The commission, the executive agency of the European Union, cleared the merger on condition the British companies dispose of the distribution of Dewar's and Ainslie's Scotch in Europe.
"I might have expected something tougher, actually," said Martin Hawkins, an analyst at Greig Middleton & Co. "I would regard these as minor amendments . . . not seriously deflecting the strong purposes of the merger."
The combined companies would be known as GMG Brands. The merger still needs the U.S. Federal Trade Commission's approval, which the companies expect in the next few weeks.
The merger plan comes amid a general decline in world demand for liquor, and as food and drinks companies face increasing pressure to spend more to market brands and push into emerging markets. Montreal-based Seagram Co. and London's Allied Domecq have said they oppose the combination.
GrandMet and Guinness have 46% of the worldwide Scotch market, 37% of the vodka market, 35% of the gin market and 27% of the liqueurs market based on 1996 sales, according to industry research group Impact International.
American depositary receipts of GrandMet, the parent of Burger King restaurants, rose 88 cents to close at $41.25 on the New York Stock Exchange; Guinness ADRs rose $1.50 to close at $52 in over-the-counter trading.
"The market is happy because even though approval was expected, there was a possibility they'd have to get rid of a really big brand, such as Johnnie Walker, J&B or Smirnoff," said John Carnegie, an analyst at BZW Ltd.