Analysts expect further consolidation in the drinks industry

That has cleared the way for a �7.4bn ($13.5bn) takeover from Pernod Ricard of France and Fortune Brands of the US.

The UK's takeover watchdog had given Constellation until 29 June to table a counter offer.

Constellation was thought to be eyeing Allied's wines business, which includes Mumm and Perrier-Jouet champagne.

'Careful consideration'

The US owner of the Mondavi and BRL Hardy wine brands surprised markets in April when it said it had entered into "preliminary" talks with Allied Domecq.

Allied had already accepted the friendly takeover approach from Pernod and would have had to pay the French firm millions of pounds in compensation had it pulled out of the deal.

The lure of Allied's brands did not prove attractive enough for Constellation, however.

"Simply put, careful consideration and evaluation of the details following due diligence did not identify sufficient value for submitting an offer," said Constellation's chairman and chief executive Richard Sands.

Constellation was considering bidding in partnership with Jack Daniel's maker Brown-Forman and private equity groups Lion Capital and Blackstone Group.