as the preferred bidder for Seagram's drinks empire, putting it ahead of a rival team led by Bacardi, industry sources said yesterday.

Lawyers from the Diageo-Pernod team were heading across the Atlantic to go through the details at the offices of investment bank Morgan Stanley and the winner is set to be notified by the end of today, New York time.

Industry sources said that an estimated $8 billion deal is likely to be signed tomorrow or over the weekend by the Diageo-Pernod team, and an official announcement made on Monday.

The Anglo-French team was left in pole position after arch-rival Allied Domecq pulled out of the race, and the Bacardi-led bid failed to match the price and financial guarantees offered by the Diageo-Pernod camp.

"Diageo and Pernod are in the driving seat. They have the top bid and only need to go through the details and sign,'' said one source close to the auction process.

A Diageo spokesman declined to comment on the Seagram auction process. Neither Seagram nor Morgan Stanley were available for comment.

Attention will focus on Morgan Stanley's offices in New York as teams of lawyers and bankers meet to hammer out a deal leaving Diageo and Pernod with the prize. The team of privately-owned and Bermuda-registered rum producer Bacardi, Jack Daniel's whiskey maker Brown-Forman, and Absolut vodka owner Vin & Sprit would be left in the cold.

The Diageo-Pernod team has been regarded as the favourite as it has the cash to move quickly, and also its deal to split up the Seagram top brands, such as Chivas Regal Scotch and Captain Morgan rum, between the two companies could avoid any potential problems with competition authorities.

France's Vivendi put Seagram, the world's third largest spirits business after Diageo and Allied, up for sale in September as part of its merger with Seagram's entertainment businesses to form Vivendi Universal.

Chairman Jean-Marie Messier, who saw shares in his Vivendi Universal company start trading this week, is keen to push through a sale by the end of the year to pay down the group's debts and then foucs on its core media interests.

Some observers point out that Messier may like to do a deal with another French company, such as Pernod, but others point out that he is simply looking to get as high a price as possible from the spirits sell-off.

Diageo is believed to want Seagram's Captain Morgan and Crown Royal Canadian whisky to add to its Johnnie Walker scotch and Smirnoff vodka business, while Seagram's Californian wine business would fit in well with its own Napa Valley wines.

Pernod would pick up Seagram's Chivas Regal and Glenlivet scotches to add to its own aniseed-based drinks and Jameson's Irish whiskey, while Martell cognac is expected to be sold off.

Industry source believe Bacardi may pick up a consolation prize in the form of the distribution of the world's top premium vodka, Absolut, after losing out with Seagram.

Seagram has a ten-year deal with Absolut owner Vin & Sprit until 2004 to distribute it outside Sweden, but this is assumed to come up for grabs with the change of control at Seagram. Bacardi, with its good U.S. drinks distribution, is seen as a favourite to pick up the rights.

Shares in Diageo closed in London off 11 pence at 667p on concern it may be forced to pay a high price for Seagram, although Pernod ended up 4.7 percent at 61.75 euros. Allied closed down two pence at 414p following a 11-1/2p decline on Tuesday on disappointment it was missing out on Seagram.

Why Allied Domecq dropped out: Page 42