LVMH Hermes stake fuels Diageo sale rumours

  • Tuesday 26 October 2010

Rumours that UK drinks colossus Diageo might buy Moët Hennessy have been reignited after parent company LVMH took a stake in luxury goods business Hermès.

lvmh

Speculation has resurfaced that the French company could look to offload its €12bn drinks division – which has brands including Moët, Krug, Dom Pérignon and Hennessy – in order to fund a full acquisition bid for Hermès.

But LVMH denied any ambition to buy the family-owned company or to seek representation on its board, insisting that it only wanted to be a long-term shareholder in the business.

It bought a 14.2% stake in Hermès, rising to 17.1%, at a total cost of €1.45bn late last week, sending the company’s share price up by 14% in early trading today (25 October).

Diageo, which already owns a 34% stake in Moët Hennessy, is thought to be in pole position to acquire the rest of the business if and when LVMH chairman and CEO Bernard Arnault decides to sell.

Matthew Jordan, head of research at financial services business Matrix Group, told The Daily Express that a deal would boost Diageo’s presence in the lucrative Chinese market.

‘Diageo is the leader in Scotch, but the number one spirit is Cognac,’ he added. ‘Investors would love the company to do this deal.

‘However, it will be a slow-burn process. It might take two, three, four years.’

Industry analysts have long suggested that Arnault would only sell Moët Hennessy if he needed the money to fund another high-profile fashion acquisition.

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