LVMH TO GET $810M IN DEAL ON DRINKS LINE

Byline: Katherine Weisman

PARIS — LVMH Moet Hennessy Louis Vuitton said Monday it has resolved its differences with its longtime drinks business partner, Guinness, over the planned merger of Guinness with Grand Metropolitan to form the GMG Brands food and beverage conglomerate.
LVMH, which had vigorously opposed the merger since it was announced in May, will take home a consolation prize worth about $810 million (500 million pounds) at current exchange.
Explaining the peace terms, LVMH said once the merger goes through, LVMH and GMG will work more closely together, and the distribution agreement that already exists between LVMH and Guinness will be extended to include Grand Met drinks brands for the U.S., France and Japan. LVMH will receive a lump sum payment of $405 million (250 million pounds) from Guinness once shareholders approve the merger, reflecting “the additional benefits to its businesses resulting from the agreement,” LVMH said. But this sum is also being called “the price of peace” in financial circles here.
LVMH, which owns just over 11 percent of both Grand Met and Guinness, will receive another $405 million in the form of a superdividend, as originally planned in the merger, which stipulated that every shareholder of Grand Met and Guinness would receive 60 pence per share for each share owned in the companies.
An extraordinary shareholders’ meeting will be called once the deal is approved by regulatory agencies for the European Community and the U.S. LVMH expects the transaction to be completed in mid-January.
LVMH said once the merger is in place and the distribution networks are shared among the companies, GMG Brands and LVMH will achieve operating savings of roughly $32.4 million (20 million pounds) each.
LVMH said it would terminate the arbitration procedures it had invoked, which are under way at the International Chamber of Commerce.
LVMH chairman Bernard Arnault will be appointed a nonexecutive director of GMG Brands once the new company is formed, and LVMH will support the merger. LVMH said it would not trade shares of Grand Met between now and the completion of the merger, and the current standstill agreements with Guinness would remain unchanged. After the merger, the shareholder structure of Moet Hennessy will remain intact; LVMH will own 66 percent and Guinness will own 34 percent.

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