The new venture will bring together premium drinks brands, including Remy Martin cognac, Jim Beam bourbon, The Famous Grouse and The Macallan whiskies, Cointreau orange liqueur and Piper-Hiedsieck champagne, with over 16 million cases in volume and about 1.2 billion euros ($1.29) billion) in annual sales, Remy Cointreau said in a statement. The three-way tie-up is the latest response from smaller players in the wine and spirits industry to growing pressure from giant competitors such as Diageo PLC, born of the 1997 merger of the UK's Guinness PLC and Grand Metropolitan PLC. Each of the three partners will contribute roughly 100 million euros in distribution assets or cash, and have equal control.

The French company willreceive L22 million euros in cash in exchange for bringing 228 million euros of assets to the venture, which will start operating in the second half.

Significant effect

"The creation of this joint venture constitutes the final stage of our strategic plan," Remy Cointreau chief executive Dominigue Heriard-Dubreuil said. "It will have a significant effect in improving Remy Cointreau's cash flow and financial ratios."

News of the venture boosted Remy Cointreau shares, which rose 7.9 per cent Tuesday to 14.90 euros, up 1.10 euros, on the Paris Bourse. The stock had already jumped 9.5 per cent on Monday, following an upbeat presentation to analysts by management and hints about the distribution deal.

A year ago, the company was reeling from the drop in sales of its biggest money maker, cognac. It reported a record loss of 621 million francs ($101.7 million) for the year ended March 31,1998, and a debt load of 6.8 billion francs roughly 2.5 times the estimated shareholder equity. At that time,Heriard-Dubreuil, whose family owns 55 per cent of Remy Cointreau, announced a recovery plan involving sale of one billion francs of assets, which were recently completed, and a series of restructuring measures.

Key among those steps was finding partners for the company's distribution network widely seen as too large and costly relative to the group's small number of brands, which has meant much lower margins than those earned by competitors with broader brand portfolios.

Product range

The three-way venture with Highland Distillers, whose brands Remy already distributes in some markets, and Jim Beam, fulfills the French company's goal of reducing its stake in the distribution unit while enlarging the product range and retaining enough control to ensure development of Remy's own brands. The new, independent distribution company will be based inAmsterdam.

There has been considerable speculation about further consolidation in the global drinks sector since the creation of Diageo, which is now theworld's largest seller of premium, branded spirits. But so far, there has been little progress.

One reason was the economic turmoil that rocked Asia, Latin America and Russia last year. This dented spirits sales at a time when the industry was just starting to emerge from years of stagnation, and gave potential merger partners the jitters.

--The Asian Wall Street Journal