LVMH chief takes stake in GrandMet

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The Independent Online
Bernard Arnault, the combative chief executive of the French champagne- to-luxury luggage group LVMH, increased the pressure on the pounds 23bn Guinness- Grand Metropolitan merger yesterday when he paid pounds 27.4m for a 0.23 per cent stake in GrandMet.

It is Mr Arnault's latest move in an attempt to derail the proposed deal.

He has agreed not to increase his 14 per cent in Guinness after recently selling a 7 per cent stake in the group.

But by taking a stake in GrandMet he hopes to strengthen his bargaining power in an attempt to force GrandMet and Guinness to consider a proposal to merge their spirits divisions with LVMH's drinks subsidiary Moet Hennessy.

"If he takes a stake in GrandMet he can cause a fuss and lobby for a merger of all three companies spirits divisions," said one analyst.

Others see this as a classic tactic from the outspoken Frenchman designed to make a profit for his shareholders.

"Arnault is trying to put the wind up people and hedge his bets at the same time. If he doesn't get his way and the merger goes through he will at least hold a stake in GrandMet which should be worth more. There could be definite upside from this deal," says another industry source. Either way it is thought likely that LVMH may seek to buy more shares in the future.

Mr Arnault's ominous move is the latest shot in an increasingly bitter war between LVMH and Guinness. They are embroiled in a legal battle over control of Moet Hennessy. Last week LVMH confirmed its plans to call in arbitrators over its claims that the proposed merger gives it the right to buy Guinness' 34 per cent stake in Moet Hennessey which has been valued by analysts at around pounds 1bn.

If LVMH wins the case it could effectively scupper any merger plans. LVMH claims any merger will trigger a change of ownership clause. At stake would also be the exclusive rights to distribute Guinness's leading spirits brands such as Johnnie Walker in the US and the Far East for the next ten years.

These contracts alone are worth upwards of pounds 200m a year to Guinness. And GrandMet would be unable to sell its vodka and tequila brands through Guinness, one of the main reasons behind the merger.