Financial Times: Diageo Under Spotlight Over Moët VentureJuly 16, 2012
From Financial Times:
A revival of speculation about its Moët Hennessy joint venture put Diageo in focus yesterday.
LVMH could finally give up control of the champagne and cognac maker by merging it with Diageo, according to analysts at Berenberg Bank.
By selling most of its stake in Moët Hennessy, LVMH would free up working capital and gain the balance sheet strength needed to make strategic acquisitions, Berenberg said. Meanwhile, the drinks business would have a market value of £48bn and carry little debt, which would allow it to become a consolidator for the premium spirits sector, the broker argued.
It valued LVMH’s 66 per cent stake in Moet Hennessy at €15bn, or up to €18.2bn if the holding was sold outright.
Diageo has said openly over the years that it would want to buy LVMH’s stake in Moët Hennessy, though LVMH’s chairman Bernard Arnault has not wanted to sell what has been the group’s cash cow.
As a result, neither company is realising the potential of each other’s assets, Berenberg said. A merger would be the optimum solution to deliver scale and costs savings, with LVMH still earning a steady associate income by retaining a minority stake, it said.
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