Diageo said it doesn’t plan to sell the Guinness beer brand or its stake in Moet Hennessy, even as pressure grows on the company to find ways to revive growth.
The UK distiller said it was responding to reports over Guinness and its 34 per cent stake in Moet Hennessy, luxury-goods conglomerate LVMH’s drinks division. “We can confirm that we have no intention to sell either,” it said in a statement on Sunday.
Bloomberg News previously reported that the UK drinks company was reviewing its portfolio after shares slumped since chief executive Debra Crew took over a year and a half ago. The range of possibilities under consideration include a spin-off or sale of Guinness and either relinquishing its stake in the Moet Hennessy venture or taking greater ownership, according to people familiar with the matter.
Investors and analysts are expecting changes to be afoot at Diageo as the new chief financial Nik Jhangiani scrutinises the company whose portfolio ranges from Scottish single malts to a champagne and cognac, as part of its minority stake in Moet Hennessy.
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Diageo said in the statement it would next update the market with its interim results on February 4th. At that point, Crew could well scrap or lower Diageo’s growth targets to reset expectations to a more realistic level, investors and analysts have said.
Diageo is already looking to sell Ciroc vodka, a brand once backed by music mogul Sean “Diddy” Combs, and could look to dispose of other subscale or underperforming labels.
There are a range of options being studied at an early stage. Among the possibilities was a potential spin-off or sale of Guinness, its premier beer brand, which would likely be valued north of $10 billion, the people said. The company could run a dual-track process, weighing a listing while also gauging takeover interest, if it decides to proceed, they said.
The Moet Hennessy stake is also under review, the people said, asking not to be identified discussing private deliberations.
Should Diageo seek to take full ownership of the joint venture, it would likely require a rights offer or the sale of its beer business, said Trevor Stirling, an analyst at Bernstein. Former CEO Ivan Menezes had always maintained that if Moet Hennessy became available, Diageo would be interested in buying it, he added. – Bloomberg
