LVMH is believed to have picked up most of the shares yesterday from Mercury Asset Management, one of GrandMet's main institutional shareholders. It now owns 6.29 per cent of GrandMet, after paying pounds 27.4m for a 0.23 per cent stake late on Tuesday afternoon.
LVMH is thought to have up to pounds 3bn at its disposal, and intends to spend at least part of it to increase its stake in GrandMet. Sources say Mr Arnault could easily afford to buy up to 25 per cent of GrandMet, but he is unlikely to go that far.
GrandMet's shares rose by 17.5p to 603.5p after LVMH's buying spree.
City analysts said yesterday the flamboyant Mr Arnault was aiming to put pressure on the board of GrandMet into considering his proposals on fusing LVMH's drinks subsidiary, Moet Hennessy, with the spirits divisions of GrandMet and Guinness.
John Wakeley, managing director of equity research at Lehman Brothers, said: "Mr Arnault's very angry with the proposed merger. He's very serious about his proposals being accepted by the board of GrandMet."
Mr Wakeley said the Frenchman's move yesterday would force GrandMet to negotiate with him. "This is enough to get them talking again," he said.
A spokesman for GrandMet said no talks between the two companies had been scheduled. He said: "Mr Arnault has his own interests to pursue. Guinness and GrandMet believe their plans for a merger create more value for shareholders than his proposals. They'll continue to pursue the merger."
Another analyst said: "I wouldn't be at all surprised if he didn't end up with a place on the board. He had a place on the board of Guinness with his 14 per cent stake. He's over the first hurdle now and will continue to buy more stock."
Mr Arnault has made a commitment not to raise his stake in Guinness any further.