When the Swedish government put Vin & Spirit, parent company of Absolut Vodka, up for sale more than a year ago, industry experts estimated it would fetch over $4 billion.

Now, Pernod Ricard, a French liquor company, is buying the brand for $8.89 billion. Absolut is the third largest spirit brand in the world, and the sale attracted the interest of many of the industry's top players: Fortune Brands (NYSE: FO), Diageo and Bacardi.

What makes the high valuation afforded to Absolut so interesting is that Pernod Ricard is paying nearly $9 billion for a brand that only really came to prominence in its current form in the 1980s.

With its racy and provocative ads (like the one on this post), Absolut was one of the first mainstream brands to aggressively target the gay community. Back when the sale effort was first announced, I opined that targeting gay media outlets was a decision that paid off, as this large, and often affluent population group, now counts Absolut as its vodka of choice. Perhaps a company like Budweiser, which has been widely criticized for spending money on ads (such as the Super Bowl) that have done little for the brand, could learn something from Absolut's edgy marketing.

The M&A field is in a rough patch right now, struggling from a tough debt market and general economic malaise. But apparently, strategic buyers are still able to pay up for strong brands.

In 1917, the Swedish government created a company with a monopoly on the alcoholic beverage business within its borders. The company, V&S Group, is still owned by the government, making internationally known brands such as Absolut. Now comes word that the Wallenberg family, through its public holding company Investor AB, is interesting in buying the firm, for as much as $6 billion.

The Wallenbergs are major holders of many of Sweden's largest companies, including Ericsson, ABB Ltd. (NYSE: ABB), Scania, SAAB, Husqvarna and Electrolux (OTC: ELUXY). Investor had a rough third quarter in 2007, posting a loss of $1.21 billion, attributed to the liquidity problem in the global credit market. It apparently hasn't quenched the family's thirst for new properties.

Investor is not the only suitor for V&S, though; industry giant Diageo (NYSE:DEO), makers of Smirnoff vodka, has already taken a tasting and found it worthy of further consideration.

Investor's deal would be made as a joint bid with the private equity firm EQT, of which Investor is the largest shareholder. Investor's net asset value at the end of the third quarter was around $24 billion.

V&S reached almost $1.6 billion in sales in 2006. It has 2,500 employees, and makes wines, Absolut spirits and other distilled products.

MAJOR PAPERS:

• According to the Wall Street Journal's (subscription required) "Heard on the Street" column, JP Morgan Chase and Company (NYSE: JPM) is working on its growth without acquisitions, by bulking up its Hollywood business and its pension-advisory business.
• The Wall Street Journal reported this morning that China's economic-planning agency said it would allow Intel Corp (NASDAQ: INTC) to build a chip plant in the northeastern city of Dalian.
• The Financial Times (subscription required) reported that Citigroup Inc (NYSE: C) has raised its bid for Nikko Cordial by 25.9% to around $13.4B.

OTHER PAPERS:

• CNet.com has learned that Microsoft Corporation (NASDAQ: MSFT) is close to acquiring privately held Tellme Networks, which a deal expected to be completed later this week.
• The U.K. Times reported that Warner Music Group Corp (NYSE: WMG) is struggling to justify raising its bid for rival EMI Group (OTC: EMIPY), because it does not believe it can risk an improved offer without having access to EMI's books.
• According to the Independent, Diageo plc ADS (NYSE: DEO) is expected to bid for Absolut vodka owners Vin & Sprit despite worries about competition.

Any heavy drinkers with deep-pockets may want to get in touch with the management of Absolut Vodka, which recently put itself up for sale. As the number 3 premium spirit in the world, the company is expected to fetch over $4 billion, but it could be a bargain. In the highly competitive world of premium alcoholic beverages, Absolut has distinguished itself with its creative, even brilliant, advertising campaigns over the years. Suitors include Diageo plc, Pernod Ricard and Fortune Brands, and there may be more. Some expect that Brown-Forman will take a look, and it's also possible that private equity might bite, although the price is likely to make it more suitable for a strategic buyer.

One interesting thing about Absolut is that it was one of the first brands to actively target the gay community in its ad campaigns. It was a decision that paid off, as this large, and often affluent population group, now counts Absolut as its vodka of choice. Perhaps a company like Budweiser, which has been widely criticized for spending money on ads (such as the Superbowl) that have done little for the brand, could learn something from Absolut's edgy marketing.