Acquisition

Diageo PLC
06 June 2005

06 June 2005



              Diageo signs agreement with Pernod to buy Bushmills



Diageo has entered into an agreement with Pernod to purchase Bushmills, the
world's second largest Irish whiskey brand, for approximately £200 million. The
acquisition of Bushmills represents an important opportunity for Diageo as Irish
whiskey is a category in which, currently, Diageo does not participate.  Diageo
  expects that the proposed acquisition will be economic profit positive during
the fourth full year after completion using a 9% weighted average cost of
capital.



In addition Pernod has granted Diageo an exclusive no cost option to purchase
Allied Domecq 's Montana wine business with the exception of the Corbans,
Stoneleigh and Church Road wine brands for 11 x 2004 contribution after
marketing expenditure (CAMP).  The purchase price, of approximately £320
million, may be adjusted to reflect information relating to the Montana CAMP
which will be available following completion of the acquisition of Allied Domecq
  by Pernod. Diageo will exercise the option subject to determining that the
acquisition of Montana can achieve appropriate growth and returns for
shareholders.



The agreements are conditional upon the successful completion of Pernod's agreed
bid for Allied Domecq  which Pernod and Allied Domecq  have both stated they
expect to occur on 26 July 2005. Both acquisitions would also be subject to
regulatory clearance and are expected to close in late 2005 or early in 2006.



Under a separate agreement Diageo has undertaken to cease discussions with any
third party in connection with any of the assets or businesses currently owned
by Allied Domecq  and not to (and to procure that none of its concert parties
will) acquire or dispose of any shares in Allied Domecq  without Pernod's
consent. This undertaking falls away on completion of the acquisition of Allied
Domecq  by Pernod



Diageo's financial position remains strong and therefore notwithstanding both of
these acquisitions Diageo will recommence the share buy back programme from
tomorrow.




Paul Walsh, Chief Executive of Diageo commented:



'Since 2000 Diageo has built a focused premium drinks company which is now a
world leader.  The business has grown organically and through targeted
acquisitions. The acquisition of Bushmills and the option we have to acquire
Montana continues that strategy.



'The acquisition of Bushmills is a particularly pleasing opportunity. This is
one of the industry's oldest Irish whiskey brands and gives Diageo, for the
first time, an important presence in this growing category. Montana is one of
the leading New Zealand wine brands and the number one New Zealand export brand.
The option gives us the opportunity to establish whether it could deliver the
same growth that we have seen from our existing wine business.'



UBS Investment Bank is acting as financial advisor to Diageo. Slaughter and May
is acting as legal advisor.



ENDS



Contacts:



Investor Relations:      Catherine James        [phone]
[e-mail]



Media Enquiries:         Isabelle Thomas         [phone]
[e-mail]





Notes to editor:



Diageo has been a lead player in the consolidation of the global drinks
industry. In December 1997 Diageo plc was formed through the merger of Guinness
and Grand Met, creating with that merger the world's leading spirits company,
United Distillers and Vintners. In 2000 Diageo merged its spirits, wine and beer
businesses followed in December 2001 by the acquisition of certain key
businesses of the Seagram Company Ltd.  Diageo now owns market leading spirits,
wine and beer brands.


In 1997 key brands retained from Guinness PLC included:  Guinness,
Johnnie Walker, Gordon's, Tanqueray and Bell's.  While key brands retained
from GrandMet included:  Smirnoff, J&B, Baileys, Cuervo, Beaulieu
Vineyard and Blossom Hill.  In 2001 we augmented our priority brand
portfolio through the acquisition of Captain Morgan, Crown Royal, Sterling
Vineyards, Cacique, Myers Rum, Bulleit Bourbon, Seagram's 7 and Seagram's
VO.  And in 2004 we went on to acquire Ursus vodka and the Chalone Wine
Group.

Diageo trades in some 180 markets around the world and is listed on
both the New York Stock Exchange (DEO) and the London Stock Exchange
(DGE). For more information about Diageo, its people, brands and
performance, visit us at www.diageo.com


                      This information is provided by RNS
            The company news service from the London Stock Exchange          NONRVARNRAR