Food and drink group Diageo has warned that the proposed sale of its Burger King fast food chain is being reviewed.

The sale was dependent on certain conditions, but aggressive pricing among competitors and a slump in sales over the last three months, has put the sale in jeopardy.

The company said: "in the light of conditions existing in Burger King's markets and the buying group's judgment on their potential effects under the agreement", the deal would now be revised.

Diageo announced in July that it had agreed the sale of its Burger King chain to a US consortium of venture capitalist firms for $2.26bn (�1.4bn).

However, the deal was subject to Burger King meeting certain performance targets.

Diageo said these are now being discussed and could lead to "no changes to the existing terms, changes to the existing terms, or....the transaction to the buying group not happening".

Back to the table

The buying consortium is made up of US venture capitalist firms Texas Pacific and Bain Capital, together with private equity group Goldman Sachs Capital Partners.

Diageo announced in March that it was focusing on its drinks business, and later cheered analysts with news of the Burger King sale.

Diageo is the world's largest drinks group, with brands including Baileys Irish Cream Liquor, Smirnoff vodka and Johnny Walker whisky.

Its Burger King is second only to McDonald's in the fast food market, with 11,000 outlets.

But is has suffered a slump in sales following the food and mouth crisis and general health concerns over fast food.

Last month the group warned that trading conditions had deteriorated over the last three months.

Lower offer

Diageo's broker, Cazenove, said there was still a high chance of the Burger King sale going through, but that the company might now accept a lower price.

Stuart Price, an analyst at WestLB Panmure said:

"In our view Diageo are committed sellers and are likely to close a deal of some sort. The question is at what price."

Investors appeared concerned that the proposed sale was in discussion, with Diageo shares dropping 2% to 705p.