Arnault waters down merger proposals

Bernard Arnault was yesterday forced to make an embarrassing climbdown just 24 hours after he launched an audacious attempt to scupper the pounds 23bn merger between Guinness and Grand Metropolitan.

Fierce criticism by institutional shareholders in Guinness and GrandMet has forced Mr Arnault to amend his alternative plans to merge the drinks businesses of the two UK companies with the Moet Hennessy champagne and Cognac operations of his French luxury goods group, LVMH.

Mr Arnault yesterday conceded that his demands for a 35 per cent stake in a merged drinks group, which would include the IDV business owned by GrandMet and the United Distillers arm of Guinness, were excessive. "We would be willing to accept a lower stake in the combined spirits business. The 35 per cent figure is a figure derived from the value of our assets against the market's assessment of the value of the combined spirits company. We could accept a stake lower than 30 per cent and we would consider taking a cash payment for some of our assets," said a LVMH spokesman yesterday.

Guinness and GrandMet still looked set last night to spurn a three-way merger of the drinks businesses and plough on with their own straight merger even though Mr Arnault is prepared to reduce his stake.

"Even if he had a 20 per cent stake he would still have a majority holding in the spirits business where most of the cost savings would be had and where the growth potential is the greatest. A demerger of our food and brewing businesses would destroy value," a GrandMet spokesman said yesterday.

An overwhelming number of big investors in GrandMet, headed by George Bull, and Guinness, led by Anthony Greener, said privately they would reject Mr Arnault's original proposals that would have given him a commanding shareholding.

Most of the UK companies' institutional shareholders believe a straight merger between Guinness and GrandMet offers the best deal and are not willing to entertain the idea of a three-way merger of the spirits businesses. Mr Arnault, despite being the biggest individual shareholder in Guinness and GrandMet, would need the support of these institutions to push his plans through.

Andrew Hartley, a UK fund manager at Scottish Equitable, which owns shares in GrandMet, Guinness and LVMH, said yesterday: "Mr Arnault makes deals that sometimes work and sometimes don't. We have no argument with his style which is why we have a holding in LVMH. But it is unlikely to work in this case. I think Mr Arnault's attempts will fizzle out. He has paid an awful lot of money to get this far and LVMH has not got the financial muscle to stop a merger."

Mr Arnault has splashed out more than pounds 800m buying a 6.4 per cent stake in GrandMet to get a seat at the negotiating table.

Another large shareholder of GrandMet and Guinness said: "Mr Arnault has tried to drive a wedge between shareholders and GrandMet and Guinness but it will not succeed. The idea of a transferring lots of value to Mr Arnault is ridiculous. GrandMet and Guinness should press ahead with their straight merger."

Some institutions were willing to entertain Mr Arnault's alternative proposals to split Moet Hennessy in two, giving GrandMet and Guinness control of the Hennessy cognac business and LVMH ownership of the Moet champagne operation.

"A split up of Moet Hennessy has a greater degree of logic," said Ralph Woodford, of Edinburgh Fund Managers.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders