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GMG merger challenged
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September 19, 1997: 11:07 a.m. ET
LVMH chief seeks changes in terms for merger of GrandMet and Guinness
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NEW YORK (CNNfn) - LVMH Chairman Bernard Arnault will present new proposals for his place in the merger of Guinness PLC and Grand Metropolitan PLC.
Moët Hennessy Louis Vuitton, the French luxury goods firm known for Dom Pérignon and Moët & Chandon champagnes, among other things, has opposed the $38 billion merger of Guinness and GrandMet.
GrandMet's holdings include J&B whisky and Smirrnoff vodka, while Guinness owns Johnnie Walker whisky and Gordon's gin.
LVMH's Arnault has stated that a merger combining the drinks operations of all three companies would be a better deal for shareholders and has opposed the proposed GMG deal, announced May 12.
Arnault is a major shareholder in both companies and said he wants a 35 percent stake in a three-way merger to be known as DrinksCo.
An LVMH spokeswoman said GMG has three areas of disagreement, and it is with these issues that LVMH would make changes:
- The new company (DrinksCo) would be independently listed.
- LVMH would receive a 35 percent stake in the new company without paying a premium to have the control.
- Certain tax problems that would occur in the merger.
The main battle seems to be shaping up over what GMG feels is LVMH's desire for an inordinate share of and power in the company. GMG said it is willing to listen to the new plans, however.
"If [Arnault] is suggesting something which adds additional value and our shareholders can get a slice of that, then obviously we'd have to take a look at it," said GMG spokeswoman Susan Gilchrist.
"We're not going to do a deal at any price if it treats our shareholders unfairly."
Arnault will discuss his proposals at a meeting with GMG officials in October.
Although the merger can go ahead without Arnault's approval, he is a force to be reckoned with due to his 11.1 percent stake in GrandMet. For now, the deal still awaits regulatory approval in both Europe and the United States.
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