City & Business: Greener goes back to basics at Guinness
Sunday 23 January 1994
Sir Alastair Morton, chief executive of Eurotunnel? He's been in and out like a fiddler's elbow for years, but right now he seems to be back in again. Archie Norman, chief executive of Asda, is in serious danger of drifting out. So too are Alan Jackson of BTR and Sir Christopher Lewinton at TI Group. Both sit precariously on the cusp between the ins and the outs. Definitely out are Sir Paul Girolami, chairman of Glaxo, Maurice Saatchi and Lord Hanson - all once pin-up boys in the stock market. The City can be a place of harsh and fickle judgement; but as Anthony Greener, chairman and chief executive of Guinness is proving, once outcast, you don't have to remain so for ever.
After an exceptionally difficult first year in the job, the tide is finally beginning to turn in his favour. Whether or not Mr Greener was directly responsible for last week's restructuring of cross-shareholdings between Guinness and LVMH of France, he is rightly getting the credit for it. He listened to what the City and shareholders wanted, drove the negotiation and ended up with by far the better half of the deal; so much so that investors have been left incredulous that Bernard Arnault of LVMH should have given away so much.
Sir Anthony Tennant, Mr Greener's predecessor, was always going to be a hard act to follow; he was an inspired manager and deal maker as well as one of the industry's most talented executives. Under his reign the group went from strength to strength and the shares rose many fold.
But what made it worse for Mr Greener was that he took up the top post just as recession began to bite deep into what the City had come to believe was a largely recession-proof business. One of Mr Greener's first tasks was therefore to dash City expectations, an appalling prospect for any chairman but particularly hard for a new one. City forecasts were far higher than what was realistically possible; Mr Greener gave analysts the facts, not the pretence. On top of that, there were hard decisions to take on rationalisation in Scotland and Spain. He also dispensed with the services of Crispin Davis, head of the group's United Distillers spirits offshoot, a vacancy yet to be filled.
To the City it looked as if a golden age had been replaced by a grey, flat, uninspired and uncertain one - a bit like John Major after Margaret Thatcher. So bad did things become that quite respectable voices in the City began to express concern and wonder whether it was right for Mr Greener to combine the two roles of chairman and chief executive in the same way as Sir Anthony had.
I don't believe there was ever any serious danger of Mr Greener being ousted, but he certainly needed this deal; it's transformed City perceptions of him. I couldn't find a single analyst on Friday with a bad word to say about the transaction; most believed it marked a sea change in investment sentiment towards the group, which for the past 18 months has been under a cloud.
Indeed, the new LVMH set-up is clearly such an advance on the old that you wonder why on earth it wasn't reformed sooner. The LVMH association goes back to 1988 when in an attempt to protect lucrative joint distribution and marketing arrangements, the two companies took 24 per cent cross- shareholdings in one another. At the time this looked like the only feasible way of cementing the relationship. A battle was raging for the heart and soul of LVMH and Guinness felt obliged to back Mr Arnault against others who wanted to break the company up and sell off its Moet Hennessy drinks interests.
But as the years passed, Mr Arnault's and Guinness's ambitions drifted apart; Guinness has no interest in LVMH's luggage and perfumes businesses and it certainly has no time for Mr Arnault's aspirations in the French media. It seemed crazy to have well in excess of pounds 1bn of capital tied up in something Guinness had no control over. The solution was always there for all to see: Guinness had to swap its holding in LVMH for a direct holding in Moet Hennessy, the crown jewel of the French drinks industry.
Getting there required Mr Arnault's agreement; for reasons not readily apparent, he eventually caved in. At a stroke Mr Greener has achieved control over Guinness's investment, he's got cash out of LVMH, and he's also managed to secure - at a very reasonable multiple right at the bottom of the drinks cycle - a substantial holding in Moet Hennessy. No wonder LVMH's minority shareholders in Paris are grumbling that they've been hard done by. It may be in Mr Arnault's personal interests to do this, but whether it is also in LVMH's is another matter.
That, however, is hardly going to concern Mr Greener. For the time being he's the City's hero once more. But having been out once, he'll be acutely aware how easy it is to lose this status. The deal was the easy bit; now there's the harder task of delivering sustained long-term growth.
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