Blog: Olly WehringDiageo and Moet Hennessy - meant to be?

Olly Wehring | 23 April 2009

The rumour-mill has cranked into gear again this week. The latest speculation is linking Diageo to a possible move for Moet Hennessy, the wine and spirits arm of LVMH Moet Hennessy Louis Vuitton.

Indeed, last week, the drinks giant was also mentioned in the same breath as Brown-Forman, although such a transaction is highly unlikely, just-drinks understands.

The Moet Hennessy situation, however, appears more likely, despite the French company's insistence yesterday (22 April) that it is not in talks with anyone over the future of the division.

For a start, unlike the majority of the drinks industry, Diageo is in a pretty healthy position when it comes to future acquisitions, with sources close to the company telling us that Diageo can get its hands on as much money as it would need, “if the transaction was right”.

Moet Hennessy is certainly the right transaction for Diageo, owning as it does the world's leading Cognac and Champagne brands in Hennessy and Moet & Chandon respectively. Diageo is notable by its absence in these two categories.

This, coupled with the fact that Diageo already owns 34% of Moet Hennessy and has three representatives on the unit's board, and it's hard to see anyone else in the running.

Factor in also the disparate nature of LVMH's portfolio, which includes TAG Heuer watches and Christian Dior perfumes. Although the drinks division provides a steady stream of revenue for the group, should it need to raise cash in the current economic climate, a sale to Diageo would involve a quick and easy process.

So long as Diageo can stump up in the region of EUR12bn (US$15.67bn).


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