French wine and spirits company Pernod Ricard said Thursday that it will stop distribution with Fortune Brands Inc. of Absolut and other Vin & Spirit brands in the US in October, quite a bit earlier than anticipated.

Pernod announced this March that it won the bid to acquire Vin & Spirit, Absolut's parent company.(See: Pernod Ricard acquires Absolut vodka for $8.89 billion)

As part of that deal, Pernod planned to end its distribution agreement with Future brands. The distribution was previously scheduled to end on February 2012. The new termination date is 1 October 2008. Pernod Ricard will pay Fortune Brands $230 million pretax as compensation.

Together with the termination of the distribution, Vin & Spirit of Sweden will also stop being a shareholder in Fortune Brands. Absolut and the rest of the V&S portfolio will join Pernod Ricard USA's portfolio.

Pernod Ricard also said it will sell the premium Cruzan rum brand and related assets to Fortune Brands for $100 million as part of a previously announced plan.

Deerfield, Illinois-based Fortune Brands, which makes Jim Beam and Maker's Mark bourbons, Sauza tequila, Canadian Club whisky and Courvoisier cognac, said separately the Cruzan purchase adds one of the rum category's fastest-growing domestic brands to its stable.

"This is a win-win agreement that provides significant benefits to Fortune Brands," said Bruce Carbonari, president and CEO of Fortune Brands. "In exchange for accelerating the end of our US distribution agreement with Absolut, we'll receive a cash payment of $230 million. We're also pleased that we'll acquire a fast-growing premium rum brand. Rum is one of the most attractive spirits categories, and the addition of Cruzan fills a portfolio gap in premium rum with the category's fastest growing brand in the US."

The company estimates it will recognize a net gain amounting to $1.18 per diluted share (approximately $180 million after tax) in its third quarter results, reflecting the cash payment from Pernod Ricard plus the remaining unamortized gain from V&S's initial investment in the joint venture, as well as modest restructuring charges to realign the sales organization.

This benefit will be partly offset by both the elimination of cost synergies and investments to build a state-of-the-art dedicated sales organization. Specifically, the company expects results to be impacted by: higher pre-tax operating costs going forward amounting to approximately $12 million in the fourth quarter and a total of approximately $35 million in 2009.

Also, as required by accounting rules, there will be elimination of the non-cash pre-tax deferred gain recognition of V&S's initial investment in the joint venture, which will no longer be amortized as Other Income ($7 million in the fourth quarter and $27 million total in 2009). The company expects the addition of Cruzan to be earnings neutral in year one, reflecting continued investment to build the brand.

The Cruzan purchase is subject to customary regulatory approvals and is expected to close within the next month, the company said. Debevoise & Plimpton LLP is advising Pernod Ricard.

Fortune Brands, Inc. is a leading consumer brands company with annual sales exceeding $8 billion. Its operating companies have premier brands and leading market positions in distilled spirits, home and hardware, and golf products. Beam Global Spirits & Wine, Inc. is the company's premium spirits business.

Pernod Ricard is the world's co-leader in wines and spirits with sales of €6,589 million in 2007/08, holding one of the most prestigious brand portfolios in the sector. It owns the Austin, Nichols company (maker of Wild Turkey whiskies) and the alcoholic beverage division of the former Seagram corporation, among many other holdings. In 2005, the company acquired British-based international competitor Allied Domecq plc. In 2008, Pernod Ricard announced the acquisition of Swedish-based V&S Group including the Absolut Vodka. This acquisition made it the world's largest beverage group before Diageo.