Diageo stalks LVMH brand
Liquor giant sets sights on Hennessy cognac and denies plans to dispose of Burger King chain
Sunday 09 November 1997
John McGrath, who will be Diageo's chief executive, said selling a major liquor brand in the US to gain regulatory approval for the merger would cost no more than 5 per cent of operating profit.
And while Mr McGrath denied Diageo plans to sell its Burger King fast- food chain, he acknowledged it may consider such a move.
"If, at some time in the future, any part of the business, including Burger King, would be better in alternative ownership, we would consider that," said Mr McGrath, currently chief executive of Grand Met.
Analysts have long speculated Grand Met will sell Burger King because it doesn't fit with the rest of the company.
Diageo will have more than 1,100 subsidiaries, ranging from liquor, beer and packaged food to hamburger and ice-cream parlour chains.
Diageo's most vocal - and biggest - shareholder, LVMH's chairman Bernard Arnault, who will have about 11 per cent of the combined company, has argued the group is too disparate.
Mr McGrath disagrees. "There are only four basic businesses," he explained. "We believe we're good managers and the key is to have focus in those four businesses with high-quality management."
Diageo, which owns the Johnnie Walker and J&B brands, Smirnoff vodka and Guinness stout, has no cognac brand. LVMH's Hennessy could fill that gap.
Earlier this year, Mr Arnault offered to sell Diageo his Moet Hennessy champagne and cognac brands, fold them into Diageo's combined liquor businesses, and spin that off into another company.
Mr Arnault also asked for a 35 per cent stake in the new company, a request that was rebuffed by the UK companies.
"Arnault has the idea Hennessy is worth more, and that's a stumbling block," said John Keele, a drinks analyst at UBS. "One would have to surmise that he's keen - but not that keen - on selling and he doesn't want to sell cheap."
While cognac sales have suffered from declining Japanese demand, Mr McGrath said he is still interested.
"There's room for the [cognac] brand in our portfolio at the right price and at the right time," said Mr McGrath. "But we would be unlikely to buy it at what I think [Arnault] thinks is the right price."
The company is unlikely to make liquor acquisitions ahead of merger approval from US authorities expected at the end of the month.
The company may be forced to sell some brands in the US because owning both Dewar's and Johnnie Walker could be considered anti-competitive.
The company has already been required by EU officials to sell Ainslie's whisky and Dewar's for approval of the merger in Europe.
Mr McGrath said the new company won't be greatly exposed to weakening South-east Asian economies, which provide "just under" 12 per cent of total profits.
Mr McGrath said the stronger British pound will dent profit. Every one-penny change in the pound's value against the dollar affects profits by "about pounds 4m one way or the other on the Grand Met side, so it will be more than that," he said. "That's life."
Look beyond the usual shows for the best festive telly
Geoffrey Macnab does not like the comedian's big screen debut
The battle for control of Stieg Larsson's £30m legacy
Ten best places to live in the UK: Hart in Hampshire takes top spot
French pub fined €9,000 after customers returned empties to bar - because it's 'undeclared labour'
David Cameron takes his biggest gamble yet as he gets tough on Europe over immigration
Burglar steals video tapes of child abuse, hands them into police
Paul Walker's daughter Meadow attends Justin Bieber Believe premiere
- 1 Tim Sherwood challenges Daniel Levy to set out vision for Tottenham Hotspur’s future
- 2 French pub fined €9,000 after customers returned empties to bar - because it's 'undeclared labour'
- 3 Sun will 'flip upside down' within weeks, says Nasa
- 4 #Teamnigella: It’s the only side to be on
- 5 Christmas comes early: Justin Bieber is 'retiring from music'
- < Previous
- Next >
iJobs Money & Business
£59999 - £80001 per annum + Benefits: Pro-Recruitment Group: A Top 10 firm in ...
£50000 - £75000 per annum + benefits + bonus: Harrington Starr: Project Manage...
£60000 - £90000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£Negotiable: Citifocus: High calibre individual with institutional client serv...