Bermuda-based Bacardi Ltd. has lost out in a bid to buy the Mexican distiller of two leading tequila brands.

US distiller Brown-Forman Corp. said yesterday it had agreed to buy Casa Herradura, the maker of premium tequila bands Herradura and El Jimador, for $876 million.

Casa Herradura said in July that it had held preliminary talks with Pernod Ricard, the world?s number two wines and spirits group; Brown-Forman, maker of Jack Daniel?s and Southern Comfort, and with Bacardi in a deal reported to be worth up to $800 million.

Last year, Brown-Forman rival Fortune Brands Inc. bought Allied Domecq brands like Sauza tequila and Maker?s Mark bourbon from Pernod Ricard.

In 2005, the US tequila market was 9.2 million cases and was growing about six percent a year, with the premium category showing much stronger growth, according to the trade group Distilled Spirits Council of the United States.

Reuters reported that wine and spirits companies have been growing at a decent clip as US consumer tastes have shifted away from beer toward cocktails and wine.

The deal also comes at a time investors are seeing value in alcoholic beverage companies amid a fall in US house prices that threatens to hurt spending across the board. Analysts say people will drink regardless of what?s going on in the economy.

Brown Forman, under an agreement with the two owners of Casa Herradura, brothers Pablo and Jose Guillermo Romo de la Pena, will also acquire the New Mix tequila-based ready-to-drink brand.

The Wall Street Journal reported that Brown-Forman is paying a substantial price for the assets and operations of Herradura given that Herradura has minimal distribution in the US. People familiar with the Herradura sales process said in April that the company could attract $650 million to $750 million from buyers, the newspaper said.

It added that demand for tequila by Americans has been particularly strong in recent years. In 2005, tequila sales volume rose 7.8 percent to about 9.1 million nine-litre cases.