Arnault row may jeopardise Guinness deal

The proposed pounds 24bn merger between Guinness and Grand Metropolitan was dealt a potentially fatal blow yesterday when a simmering dispute between Guinness and the key shareholder, the luxury goods group Moet Hennessy Louis Vuitton, broke into the open.

Bernard Arnault, the LVMH chairman, who was the only member of the Guinness board to vote against the merger, said the deal would constitute a change of ownership of Guinness and therefore trigger clauses in the joint venture arrangements signed between the two companies three years ago.

Under those agreements, LVMH has the option to purchase, at net asset value, Guinness's interest in all their existing joint ventures if there is a change of control. LVMH also says it would have the right to repurchase the 34 per cent stake in Moet Hennessy from Guinness at a discounted price. The LVMH statement said it would exercise its rights if the deal goes ahead.

If the attempt succeeded, LVMH would operate the joint ventures independently and have the right to market and distribute Guinness brands in key markets such as China, France, Hong Kong, Singapore and the US for the least 10 years.

Guinness dismissed the claims saying: "We are completely confident that there is no basis for this assertion." The company said it had had five teams of lawyers working on the deal and would not have pressed ahead with the merger plans if it had not been confident that it would withstand legal challenge. However, it is likely that the claims will seriously delay the merger which could now be subject to lengthy litigation in French courts.

While some analysts described Mr Arnault's action as little more than "spoiling tactics", others said it could place the Guinness-Grand Met merger in serious jeopardy. "I think it will delay and disrupt the deal with lengthy legal proceedings in prospect," said Charles Winston, drinks analyst at HSBC James Capel. "The chances of it going ahead in its current form are now much reduced." Another said: "Guinness will have to consider the cost of giving up control of its brands that are distributed in some of the world's key drinks markets. It would seriously dent its income stream."

Analysts were speculating that Guinness might pay LVMH to agree to not exercise its rights, with some mentioning a figure of pounds 1bn.

However, John Beaumont of Merrill Lynch said Mr Arnault's broadside did not represent a "deal-breaker". He said the challenge was unlikely to stand up in court as the clauses in the joint venture were included to act as a deterrent if Guinness was the subject of a hostile takeover, not an agreed merger. "It is more likely that this is an attempt by Arnualt to try to get Guinness and GrantMet back around the negotiating table," he said

Yesterday's statement from LVMH hinted at this saying: "LVMH ... does not believe that shareholder value will be maximised by creating a conglomerate combining certain businesses with no common thread."

Mr Arnault had wanted Guinness to separate its beer activities from its spirits business to create a spirits giant in conjunction with LVMH. "This proposal remains open for discussion," the statement said.

Shares in both Guinness and GrandMet fell by more than 2 per cent on the news. Guinness fell 14p to 582p while Grand Met closed 15.5p lower at 581p.

Mr Arnault will chair the annual LVMH shareholders' meeting in Paris tomorrow. His relationship with Guinness has soured in the past year following his outspoken remarks on trading and share price performance.

Some analysts said he was trying to ensure that if the merger did receive regulatory approval then at least there would be significant benefits for LVMH.

"He does not appear to be against consolidation ... just the way in which Guinness and GrandMet have struck this particular deal," said Nick Williamson at Credit Lyonnais Laing.

Comment, page 23

Stephanie first after her public appearance as a woman at Rad Fest 2014

Arts and Entertainment
Banksy's 'The Girl with the Pierced Eardrum' in Bristol
art'Girl with the Pierced Eardrum' followed hoax reports artist had been arrested and unveiled
Oscar Pistorius is led out of court in Pretoria. Pistorius received a five-year prison sentence for culpable homicide by judge Thokozile Masipais for the killing of his girlfriend Reeva Steenkamp
voicesThokozile Masipa simply had no choice but to jail the athlete
Life and Style

Board creates magnetic field to achieve lift

Russell Brand at an anti-austerity march in June
peopleActor and comedian says 'there's no point doing it if you're not'
Arts and Entertainment
Sister Cristina Scuccia sings 'Like a Virgin' in Venice

Like Madonna, Sister Cristina Scuccia's video is also set in Venice

Arts and Entertainment
James Blunt's debut album Back to Bedlam shot him to fame in 2004

Singer says the track was 'force-fed down people's throats'

Life and Style
The Tinder app has around 10 million users worldwide

techThe original free dating app will remain the same, developers say


Endangered species spotted in a creek in the Qinling mountains

ebooksAn unforgettable anthology of contemporary reportage
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
peopleJust weeks after he created dress for Alamuddin-Clooney wedding
Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

Life and Style

Some experiencing postnatal depression don't realise there is a problem. What can be done?

Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Customer Service Executive / Inbound Customer Service Agent

£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

ASP.NET Web Developer / .NET Developer

£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

Day In a Page

Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Let's talk about loss

We need to talk about loss

Secrecy and silence surround stillbirth
Will there be an all-female mission to Mars?

Will there be an all-female mission to Mars?

Women may be better suited to space travel than men are
Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album