City File: The markets for distillers

Funny things are happening in the (restricted) market for distillers. Invergordon is up to 319p, on the assumption that American Brands, which failed with its bid last year, will return in a month's time when it is allowed back. But the downside risk if American doesn't return, or if it decides to sell its 40 per cent stake, seems dangerously large.

By contrast Highland Distilleries may now be undervalued. The market is already discouraged, with the shares at 220p, a third down on the year's high. The market has a point in that next week's interim profits will reflect reduced demand for all blended Scotches - even Highland's flagship, The Famous Grouse - in most of the world's markets. But Highland has a secret weapon: its 20 per cent stake in Orpar, the holding company for Remy Cointreau. Although the French group is heavily indebted, its collection of brand names, from Remy Martin to Krug champagne, would be immensely valuable in case of a forced sale.