Allied Domecq Plc could well be overlooked as the Canadian spirits group is drawn towards a link with privately-held Bermuda-based Bacardi.

Recent reports have highlighted Seagram's apparent desire to merge its media business, leaving its spirits free to forge their own partnerships. But, analysts believe Allied does not have the portfolio of top brands to attract Seagram.

As talk focuses on Seagram's future, analysts believe an exit from drinks medium-term makes sense but a combination with Bacardi would achieve the best industrial logic and give the best-matching brand portfolio.

Allied is unlikely to mount a bid for Seagram's drinks unit as a likely price tag of $7 billion is seen as too high for the UK company, which was this month demoted from the FTSE 100 index of Britain's top companies.

With few in the industry able to afford such a price, a "no premium merger'' is seen the most likely exit for Seagram and then the Canadian group would be free to pick its own partner.

The former top two in world's spirits market, Guinness and GrandMet, formed industry powerhouse Diageo Plc in December 1997, with a no premium merger as both considered there was not enough upside benefit to warrant an outright takeover.

Then, Diageo chairman Tony Greener believed there was simply not enough costs to be taken out of relatively low-cost businesses and insufficient sales uplift to warrant a premium priced takeover. This still holds true, say industry analysts.

Although Allied is number two in spirits volume terms after Diageo, its four key brands of Ballantine's scotch whisky, Beefeater gin, Kahlua liqueur and Sauza tequila are not as interesting to Seagram as the Bacardi's brands.

Seagram's five top brands are its premium scotch Chivas Regal, Martell cognac, Captain Morgan dark rum, Crown Royal Canadian whisky and distribution rights for Absolut vodka.

Bacardi has its eponymous white rum brand, which is the top selling spirits brand in the world, Dewar's scotch and Bombay Sapphire gin. These three, the world's top spirit, a standard scotch and premium gin would fit well with Seagram's brand portfolio.

Bacardi partnership Weekend reports that Seagram was in merger talks with French media group Vivendi and US Cox Communications, were denied by the French group, with a Seagram spokeswoman describing the talk as "rumour and speculation.'' But this came hard of the heels of a report last month that Seagram Chief Executive Edgar Bronfman had had talks about selling the company to Rupert Murdoch's News Corp. The Bronfman family has a 24 percent stake in the Universal Studios, media and drinks group.

If any of this merger talk came to fruition, the drinks side could be sold to Bacardi, Allied or US Brown-Forman Jack Daniel bourbon and Southern Comfort liquor company.

An Allied spokewoman said, "We would welcome industry consolidation and would want to be driving it.'' But analysts said Allied, under chief executive Philip Bowman, would find it hard to find a drinks partner.

The key, of course, is what Bacardi and Seagram are thinking. Does Bacardi want to relinquish full control and does Bronfman really wants to sell the family drinks cabinet.

The Bermuda-based private company said last November it had opted against an initial public offering of shares, saying, "the desired consensus of our shareholders does not exist at this time''.

While Bronfman said in February, "As angry and frustrated as I am with the theories and inaccurate speculation, I intend to be CEO of this company for a long time. I like the businesses, all of them, that we are managing and plan to continue to manage them.'' However, whether something like a 50:50 venture can be hammered out between the third and fourth largest spirits groups in the world is still occupying analysts' thoughts.

This would create a group that could challenge Diageo as the world's number one, although the British group has a head start with a brand portfolio that includes the world's top two scotches, Johnnie Walker Red and J&B, leading gin Gordon's and best-selling vodka Smirnoff, together with the world's leading liqueur Baileys and top tequila Jose Cuervo.

Where does this leave Allied's search for a partner? France's Pernod-Ricard has limited aspirations, after its blocked attempt to sell its Orangina soft drinks and would offer Allied limited scope, and Brown-Forman has been unwilling to move closer to Allied in distribution deals worldwide.

The French group with its Ricard and Pernod aniseed spirits and Jameson Irish whiskey was rumoured to be bidding for Allied last year, but no bid emerged.

Allied shares have managed to keep pace with the FTSE All Share index in a dispirited drinks sector over the last 12 months and have ranged from a high of 389-1/2p when it completed the sale of its UK pubs business in early September 1999 to 245p earlier this month on its exit from the FTSE 100 index.

It was trading down two pence at 305p at 1500 GMT.