FTC ClearSeagram Acquisition

19 December 2001

FTC clears Seagram acquisition

The Federal Trade Commission has issued a consent order permitting Diageo and
Pernod Ricard to acquire the Seagram spirits and wine business. When this
transaction has closed Diageo will own the Captain Morgan, Crown Royal,
Seagram's 7 Crown, Seagram's VO and Seagram Chateau & Estates wine, together
with a number of other key businesses.

Commenting Paul Walsh, Diageo Chief Executive, said:

'Last summer we announced Diageo's strategic realignment behind premium
drinks. Our strategy is to focus on our priority brands in their most
important markets. As part of this strategy, we supplement organic growth with
key strategic acquisitions. Today we are delivering further on that strategy.
Through this transaction Diageo will acquire a series of exciting spirits
businesses and a very significant extension to our wine business.

'These acquisitions will sharpen Diageo's focus on premium drinks and give us
further potential to create new value for our shareholders. With today's
announcement we also underline Diageo's position as the world's leading
premium drinks business.

'We are encouraged by the performance of our premium drinks business in these
uncertain times. We continue to drive our innovation agenda and invest behind
our brands whilst capturing the benefits of our marketing efficiency
programmes and the current media deflation.'

Diageo has also:

  * agreed to satisfy FTC concerns on US competition in rum. It will sell
    its Malibu brand within six months after the close of the transaction.
  * undertaken to hold separate the Joseph E Seagram US spirits business and
    to implement certain other procedures around the world to prevent the
    exchange of information in the United States between the Captain Morgan
    and Malibu business until it has sold the Malibu assets which gave the FTC
    concern.
  * issued an update on current trading ahead of its closed period and its
    half-year results in February 2002.



Regulatory approval

The United States Federal Trade Commission has issued a consent order enabling
the acquisition of Seagram's spirits and wine business by Diageo and Pernod
Ricard to proceed. Diageo, Pernod Ricard and Vivendi Universal expect to close
the transaction shortly.

After discussions with the FTC, Diageo has agreed to sell its Malibu business
within six months after the close of the transaction. The FTC had suggested
that Diageo's ownership of both Malibu and the Captain Morgan rum brands would
adversely affect US competition in rum. Diageo has entered discussions with a
number of parties interested in buying Malibu.

Diageo has also agreed with the FTC to hold separate the Joseph E Seagram US
spirits business. Diageo will implement certain other procedures around the
world to prevent the exchange of information in the United States between the
Captain Morgan and Malibu business until it has sold the Malibu business.

In October 2001 Diageo undertook to sell the Gibson's Finest Canadian whisky
business in order to obtain the approval of the Canadian competition
authorities. In order to meet the requirements of EU competition authorities
Diageo has also undertaken to sell the Four Roses bourbon business and to keep
Captain Morgan distribution in Iceland separate from that for the rest of the
Diageo portfolio.



Four Seagram businesses to be sold

Diageo, Pernod Ricard and some of their affiliates have entered agreements for
four businesses currently owned by Seagram to be sold following the close of
the transaction. These are:

  * The UK based off-license chain Oddbins to Castel Freres Group of France.
  * The Four Roses bourbon business to Kirin Brewery Company Ltd of Japan.
  * The Mumm Sekt sparkling wine business sold to Rotkappchen Sektkellerei
    GmbH & Co KG of Germany.
  * The Sandeman port and sherry business sold to Sogrape Holding SGPS SA of
    Portugal.

The value of these disposals is in line with Diageo's original expectations. A
number of other Seagram businesses are expected to be sold over the months
following the close of the transaction. In some countries these businesses
will be run separately from those being acquired by Diageo or Pernod Ricard.



Trading update

Trading performance in Diageo's premium drinks business continues to be driven
by:

  * growth of the global priority brands;
  * the expansion of the ready to drink sector and Diageo's continued
    success with Smirnoff Ice;
  * strong performance in the major markets and delivery of the projected
    benefits of the Guinness UDV integration.

Overall, volume and net sales have continued to grow at comparable rates to
those achieved last year. There has been continued strong growth in Smirnoff
Ice together with an improvement in the volume growth of the core Smirnoff
brand particularly in the United States both in Smirnoff Red and the new
Smirnoff Flavors range. Cuervo volumes have been adversely affected by the
price increases put through to cover the increase in agave costs. The
successful roll-out of proven marketing executions for Baileys has driven
strong volume growth. Guinness volume and net sales growth has been driven by
continued strong performance in Africa and the launch of Guinness draught in
bottle in the US.

The performance of the local priority brands has benefited from the launch of
Archers Aqua in the UK.

Aggregate volume performance in non-priority brands is broadly in line with
prior year.

Diageo remains committed to its exit from food and to separating its Burger
King business. The emphasis now being placed on improving restaurant
operations together with more consistent focus on the Whopper is beginning to
deliver an improvement in performance. Positive comparable restaurant sales of
nearly 1% were achieved in the first four months of the year in the United
States. This is encouraging and represents a significant improvement in
performance over recent years. However as a result of continued difficult
trading outside North America, worldwide comparable restaurant sales were flat
over that period. Operating profit for the period will be affected by
investment in new marketing initiatives and in operations to develop the
business and provide for a smooth separation.

Diageo has substantially increased investment in the year in RTD production
capacity, including the acquisition of a brewery in the US. Capacity has also
been increased to support the growth of Guinness in Africa.

Diageo has repurchased for cancellation almost 40 million shares at a cost of
approximately £280 million since the beginning of the current financial year.

Diageo expects to announce Interim financial results for the six months ended
31 December 2001 on 21 February 2002. No other updates on current trading are
planned before that date.

All statements made in this trading update are based on the group's
performance for the four month period to 31 October 2001 and except where
otherwise stated, comparisons are with the previous full year.

                                  -- ends --

This document contains statements with respect to the financial condition,
results of operations and business of Diageo and certain of the plans and
objectives of Diageo with respect to these items. These forward-looking
statements are made pursuant to the 'Safe Harbor' provisions of the United
States Private Securities Litigation Reform Act of 1995. In particular, all
statements that express forecasts, expectations and projections with respect
to future matters, including trends in results of operations, growth rates,
overall market trends, the completion of our strategic transactions (including
the impact of any conditions imposed by regulatory authorities in connection
with approving such transactions) and the effects of future business
combinations, acquisitions or disposals and the ability to realize expected
synergies and/or cost savings are forward-looking statements. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future. There are a
number of factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements, including factors that are outside our control. These factors are
set forth in more detail in under the heading 'Risk Factors' in Diageo's Form
20-F filed with the Securities and Exchange Commission. All oral and
forward-looking statements made on or after the date of this document and
attributable to Diageo are expressly qualified in their entirety by the above
factors.





Notes to editor:

Diageo is the world's leading premium drinks business.  Formed in December
1997 by the merger of GrandMet and Guinness, Diageo has an unrivalled
portfolio of brands including Smirnoff, Johnnie Walker, Tanqueray, Guinness, J
&B, Baileys, and Cuervo.

In a strategic move to drive organic growth, Diageo has realigned behind
premium drinks, exiting food. Diageo completed its sale of Pillsbury to
General Mills on 31 October 2001 and in June 2000 announced its intent to
separate its Burger King business.

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