Arnault applies more pressure on Guinness

Bernard Arnault, the chairman of the LVMH luxury goods group, continued his assault on the proposed pounds 24bn merger between Guinness and Grand Metropolitan yesterday at the company's annual meeting in Paris. He told shareholders that LVMH would take on debt to fund his plans to buy Guinness' 34 per cent stake in the Moet Hennessy spirits business as well as the British company's share of the 17 joint ventures between the two groups. He did not put a price on the deal though analysts said they could cost up to pounds 1bn.

Mr Arnault also ruled out any sale by LVMH of its drinks business or the distribution joint ventures in which Guinness has long expressed an interest. "The wines and spirits at the heart of Moet Hennessy are a fundamental part of LVMH's strategy and a disposal is completely ruled out," he said.

Mr Arnault's comments followed his broadside on Wednesday when he said the Guinness-GrandMet merger represented a change of control which, under the terms of agreements signed in 1994, would trigger clauses that would allow LVMH to buy out the Guinness stakes at a discounted price. This would give LVMH control of Guinness brands in key markets for "at least 10 years".

Mr Arnault assured shareholders that the purchase of the Guinness stakes would not affect the company's results. "This ... would have a positive impact on LVMH's accounts," he said.

Mr Arnault, who was the only member of the Guinness board to vote against the GrandMet deal, said: "If we oppose this plan, that is because it would lead to the creation of a conglomerate grouping wines, spirits, fast food and canned foods without any coherence among them. We don't see any increase in shareholder value from this operation."

Tony Greener, the Guinness chairman, stood down as a director of LVMH yesterday. This had been agreed between Mr Greener and Mr Arnault in March. However, he failed to attend the LVMH meeting yesterday, preferring to undertake a tour of Scotland to explain the merger to workers.

His "no show" returned in kind Mr Arnault's action earlier this month when he chose not to attend the Guinness agm due to a conflicting engagement. Mr Arnault told shareholders that Mr Greener had written to him a week earlier to say he would not be attending. Guinness says it has no plans to meet Mr Arnault to discuss the legality of the Frenchman's plans, likely to be the subject of legal dispute.

Separately, the European Competition Commissioner, Karel Van Miert, hinted that the merger might face an uphill struggle in Brussels. "It is well known, I think, what the problems are, the competition concerns which have been identified." He said there would be a hearing in a few weeks.