Moet Hennessy is the wine and spirits unit of luxury goods group LVMH

Moet Hennessy is the wine and spirits unit of luxury goods group LVMH

Diageo could look to make a "quantum leap" by buying out LVMH's majority stake in Moet Hennessy under Ivan Menezes' leadership, according to an analyst. 

In a note today (21 May), Nomura's Ian Shackleton said that the UK firm's "strong" balance sheet means it "has firepower to do more deals". Talk of Diageo looking to buy Moet Hennessy outright surfaced in 2009, but LVMH ruled out the sale.

However, Shackleton said Diageo, which has a 34% stake in Moet Hennessy, would still be keen to acquire LVMH's 66% stake as the unit's Cognac business would boost its premiumisation "index" and increase its exposure to Asia. 

Diageo and Moet Hennessy already have joint distribution arrangements in place in "most" Asian markets and France, Nomura noted.

Based on Moet Hennessy's 2013 full-year EBITDA, Nomura values the overall business at around EUR29bn (GBP24bn). Therefore, Diageo would have to pay around EUR19bn for LVMH's 66% stake. 

Meanwhile, the appointment of Menezes, confirmed as Paul Walsh's replacement earlier this month, is likely to be an "evolutionary, rather than revolutionary" process, Shackleton suggested. 

The company is also expected to up its focus on emerging markets by acquiring more local spirits brands, he added.

However, Shackleton said Menezes' appointment had come "sooner than expected", with the anticipation previously that Walsh would remain until the company reported its full-year numbers at the end of July.