Diageo plc (LSE:DGE) is considering whether to sell off Guinness Limited as it plots a review of its overall drinks business. The company, which was formed by the merger of Guinness with Grand Metropolitan in 1997, is studying a potential sale or spin off of the historic stout, which would likely be valued at about $10 billion (EUR 9.5 billion), according to people familiar with the matter. The company could run a dual-track process, weighing a listing while also gauging takeover interest, if it decides to proceed, the people said.
Diageo's company s share price has fallen 27% since Debra Crew took over as chief executive a year and half ago, and the group's sales have dropped on cooling demand in China and the United States. As well as that, the owner of Guinness and Johnnie Walker surprised investors with a profit warning just months into her tenure after getting caught out by piles of unsold inventory in Mexico and Brazil. Sean Diddy Combs As well as possibly offloading Guinness, 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.
Diageo's 34% in Moet Hennessy is also under review, the people said, asking not to be identified discussing private deliberations. Diageo could look to deepen its ownership in the venture, or exit altogether. If it wanted to sell the stake, LVMH has an obligation to buy it, albeit at a 20% discount to its fair value, according to their agreement.
The division has been suffering from poor demand for two years. 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 chief executive Ivan Menezes had always maintained that if Moet Hennessy became available, Diageo would be interested in buying it, he added.
They have never acknowledged that they would be willing to sell beer in fact they have always denied it, Mr. Stirling said. But I think in this case it s something they might be willing to do. No final decisions have been made, and there's no certainty the deliberations will lead to any deals.
Diageo declined to comment on its plans, as did LVMH.