Arnault tries fresh approach on Guinness drinks tie-up

Bernard Arnault's campaign to scupper the pounds 23bn merger between Grand Metropolitan and Guinness took another twist yesterday. Mr Arnault, the head of the LVMH French luxury goods group, signalled he was willing to drop demands immediately to split up Pillsbury and Burger King, the food businesses of GrandMet, to avoid potential tax problems.

He is due to start lobbying institutional shareholders of the UK drinks groups within weeks to accept new proposals to create a separate three- way spirits business including LVMH's spirits business, Moet Hennessy. Guinness' brewing arm and the GrandMet food businesses would then be demerged.

However, Guinness looks set to reject the new proposals which could lead to open warfare between the two sides.

Tony Greener, Guinness' chairman said: "We don't see why we should demerge businesses that have strong growth potential. Guinness Brewing is growing strongly."

LVMH renewed claims that the merger between the UK drinks groups would mean it could assume control of the series of international drinks joint ventures it runs with Guinness. Guinness said it was confident of winning the battle, though a decision from the French arbitration service would probably not be available until the middle of next year.

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