the $8 billion-plus Seagram drinks empire.

Bacardi, in conjunction with Jack Daniel's maker Brown-Forman, is one of two bidders for the Chivas Regal scotch to Captain Morgan rum business.

The other bidder is an Anglo-French alliance between Diageo and Pernod-Ricard which looks to be in pole positionm, sources said.

French media giant Vivendi Universal has put the drinks company, after merging with Seagram, which bought the Universal film studio in the 1990s.

A source close to the auction process said Pernod-Diageo had offered somewhere between $8 and $8.5 billion. "That is the sort of figure that we are talking about,'' he said.

The other bid on the auction table is from privately-owned Bacardi and Brown-Forman, but it is regarded as having the longer odds in a now two-horse race.

Another source close to the sale process said yesterday that the Bacardi consortium had all financing at hand with its debt needs fully underwritten.

"We have at this time two very competitive proposals for the sale of our spirits and wine business,'' a Vivendi Universal spokesman said, but declined to identify the bidders.

"We are confident that the process is on the right track and a definitive agreement will be signed before the end of the year,'' the spokesman added.

Allied Domecq declined comment on the Seagram auction, but sources familiar with the situation said yesterday the company was yet to finalise financing arrangements for a potential bid.

Allied was initially tipped as a top favourite for the business but it refused to sign a confidentiality clause giving it access to detailed data on Seagram, effectively ruling itself out of the formal auction process.

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.

Vivendi shares were up 4.8 percent at 77.55 euros by 1617 GMT on the higher than expected price for Seagram while Pernod was off 3.04 percent at 59.00 euros. Diageo was up 1.5 percent at 677p, while Allied slipped 2.69 percent to 416p.

Industry sources expect the first sounding to come from the auction later this week and a winner announced either at the end of the week or more probably early next week after final bids were submitted late Monday to investment bank Morgan Stanley.

They say that the only thing that could delay the auction process would be a highly conditional bid by Allied.

Diageo-Pernod has been long regarded as favourite as the group has the cash to move quickly, and also its deal to split up the Seagram brands could avoid any anti-trust problems.

If successful, the Anglo-French duo plans to split the costs roughly 50-50, industry sources said, but this split may change subject to the final distribution of brands and their price.

"The percentage will be a function of the final bid -- they have allocated values to the brands, so it may not necessarily be 50-50,'' the source said, adding final prices per brand could determine the final weighting for each party.

Bankers say Pernod has lined up a loan of four billion euros ($3.6 billion) to fund its part in the offer, while Diageo, which has sold off its US Pillsbury food division and plans to float its hamburger chain Burger King, has plenty of firepower.

Diageo is believed to want Captain Morgan dark rum and Crown Royal Canadian whisky to add to its Johnnie Walker scotch and Smirnoff vodka, 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.

The Bacardi and Brown-Forman camp has joined forces with Sweden's Absolut vodka owner, the government-controlled Vin & Sprit, to try to gain distribution outside Sweden for the world's top-selling premium vodka.

Seagram has a ten-year deal with Vin & Sprit until 2004 to distribute Absolut outside Sweden, but this is assumed to come up for grabs with the change of control at Seagram, and Bacardi with its good US distribution is seen as a favourite for what many view a consolation prize for the auction loser.