Comment: No easy way out of the Arnault impasse
Friday 25 July 1997
These are no idle threats. His stake-building in GrandMet will soon put him in a position to block the merger. Moreover, the Frenchman's record in winning control of LVMH, and his more recent assault on Chateau d'Yquem in France, suggest he's perfectly comfortably with the idea of biding his time and weathering quite substantial short-term losses while he does so. Since Mr Arnault is rejecting all the compromise proposals suggested by John McGrath, chief executive of GrandMet, it's hard to see how Guinness and its partner can find a way out of the impasse.
Mr Arnault wants the drinks divisions of all three companies - Guinness, GrandMet, and his own LVMH - merged into a colossal menage a trois and then floated off separately on the stock market. He might be prepared to budge a bit on the 35 per cent shareholding in the new company he is demanding for his own interests, but the basic concept is not up for discussion. There are a number of reasons why this is likely to prove unacceptable to UK investors.
The first and most obvious is that Moet Hennessey is almost certainly not worth as much as Mr Arnault thinks it is. The second is that to merge these businesses while separately demerging processed food, fast food and brewing from GrandMet and Guinness would be a hugely costly, time consuming and complex business. These things are best taken one step at a time.
But the most fundamental objection remains that Mr Arnault would be left with a controlling stake in the new drinks company and that would be unacceptable to a large number of City investors. As a result, the company might never come to reflect its true value to outside shareholders.
The upshot is that the merger looks increasingly likely to run up against the buffers. Since Mr Arnault won't budge, and he won't vote for the merger as proposed, it is hard to see a way out of the impasse. For GrandMet, the best policy might be to walk away. It was Guinness that brought the wily Frenchman to the party in the first place. They made their bed, now let them lie in it, Mr McGrath must be tempted to think. Perhaps the biggest irony of all this was that when the cross-shareholdings between Guinness and LVMH were first established in the 1980s, part of the purpose was to thwart any designs GrandMet might have on either LVMH or Guinness. Thus do yesterday's solutions become today's humdinger of a problem.
- 1 Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
- 2 Maisie Williams has an excellent message for one confused fan
- 3 There is something wrong but very right about this Bible illustration
- 4 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
- 5 Tampon tax scrapped in Canada after petition convinces conservative government
Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
Maisie Williams has an excellent message for one confused fan
Archaeologists discover 2,400-year-old gold bongs in Russia
Tampon tax scrapped in Canada after petition convinces conservative government
Migrants in Kos: Photos show real tragedy after British tourists complain of 'awkward' holidays
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
A nation of inequality: How the UK is failing to feed its most vulnerable people
Australian man punched in the face for defending Muslim women from abuse on train
David Starkey 'tells Amal Clooney to shut up and stop over-promoting human rights'
EU referendum: David Cameron to deny EU migrants and under-18s the chance to vote
iJobs Money & Business
£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...
£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...
£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...