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France’s LVMH Moves to Increase Guinness Stake

May 31, 1990

LONDON (AP) _ LVMH Moet Hennessy Louis Vuitton, a French liquor and luxury products group, on Thursday moved to increase its stake in Guinness PLC to 24 percent, in line with the British liquor company’s stake in LVMH.

LVMH said it didn’t intend to increase its holding beyond that level, and that the move was part of an agreement reached with Guinness in 1988 to hold equal stakes in each other.

Guinness said it welcomed the move.

LVMH makes Moet champagne, Hennessy cognac, Louis Vuitton luggage and perfumes. Guinness, a brewer, also makes Johnnie Walker Scotch whisky and Gordon’s gin. The companies have said the cross-holdings underscore their commercial cooperation.

LVMH said it was lifting its Guinness stake to 24 percent by offering to buy 6.8 percent of Guinness through a tender offer. LVMH was offering to pay as much as $13.86 a share for up to 59.4 million Guinness shares.

LVMH’s current holdings include 42.8 million shares which the company acquired Thursday. These purchases plus the tender offer will cost a total of about $1.4 billion, LVMH said.

Guinness shares stood at $12.80 on London’s Stock Exchange Thursday morning, up from $12.47 at Wednesday’s close.

Guinness gradually acquired its 24 percent stake in the French group over the past two years.

LVMH’s statement that it doesn’t intend to raise its Guinness stake beyond the 24 percent level deflated market speculation that LVMH Chairman Bernard Arnault intended to bid for all of Guinness.

An LVMH management source in Paris said that ″the increase in our participation was directly in line with our agreement with Guinness. Guinness has said in the past that it would welcome such an equal level.

″Cross-shareholding is the best way for us to cooperate and still maintain our autonomy,″ he said, speaking anonymously.

Guinness spokesman Chris Davidson said the move ″is not a surprise at all. We have been talking about this a year now. Now that it has happened, clearly it’s something that underscores the commercial confidence we have in each other.″

The companies likely will build their commercial ties, which include the joint marketing and distribution of the two group’s liquor operations, he said.

″We’re two fairly compatible companies,″ Davidson said.

Last year Guinness had after-tax profit of $793 million on sales of $5.2 billion. LVMH said its profit and sales figures were not immediately available.

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