Australia's wines are growing in popularity

Instead, independent directors at Peter Lehmann have thrown their weight behind a lower offer from its bidding rival.

Swiss-based wine distributor Hess Group has won the board's blessing with a A$143.6m (�58m) cash offer, almost 4% lower than Allied's bid.

Peter Lehmann argued that Allied's bid was riskier, needing at least 51% backing from shareholders.

Wine 'more popular'

Alllied, whose brands include Beefeater Gin and Tia Maria, has twice trumped offers from Hess in its efforts to add Peter Lehamann Wine (PLW) brands Ambassador, Barrossa and Clancy's to its stable.

Behind Allied's bid strategy has been a hefty rise in consumer demand for Australian wines, especially in the US, Britain, Scandanavia and at duty-free outlets.

It's current brands include Beefeater Gin and Tia Maria.

Bid door open

PLW chairman Richard England said that the wine maker favoured the lower Swiss offer as it had no strings attached, but he left the door open to a higher bid from Allied.

"While the Independent Directors acknowledge that Allied is offering a 15 cent or 3.9% premium to the Hess offer, they believe this is insufficient to compensate for the uncertainty and risk created by Allied's conditions," Mr England said.

Since Hess fired the starting gun on the bidding race at the end of August both companies have sweetened their original offers to put themselves in pole position.

Allied Domecq said it was disappointed and found it curious that the board did not recommend the highest offer, but said it was comfortable with its bid at the moment.

"We're certainly not panicking," said a spokeswoman for Allied Domecq.