Diageo Eyeing 100% of LVMH Drinks Business?
Diageo may want LVMH drinks.
Bain & Company, a U.S. retail consultant company, published a study recently that claims a surge in luxury sales of apparel, shoes, accessories, leather goods, and perfumes, despite the sluggish economy because, as Claudia D'Arpisio, a company spokesperson said, "The recovery has been faster than expected."
The company expects a 3 to 5 percent increase in luxury goods sales in 2011, and points out that the market for luxury goods is likely strongest with young males in China.
Headed by France's richest man, Bernard Arnault, LVMH deals in all sorts of luxury goods and the company recently took a 14% stake in Hermes. Analysts think that's only the start of a takeover bid.
Gallery: Diageo Eyeing LVMH Drinks Business?
Maybe that Chinese connection is why one of the largest wine and spirit multinationals, Diageo, wants to increase from 34 percent to 100 percent its hold on Louis Vuitton's Moet Hennessy (LVMH) drinks division. China is where wine and spirits are selling big time. Diageo is interested in Moët & Chandon, Krug, Dom Pérignon, and Veuve Cliquot Champagne brands, plus of course Hennessy Cognac-all luxury drinks.
Would it be a good move by Diageo?
Perhaps. Champagne exports have recently dropped by about one third; still, in 2009, LVMH's drinks division represented about 16% of the company's overall sales of about $35 billion.
More important, would LVMH care to sell?
Word is that Goldman Sachs and Credit Suisse have advised Diageo of the benefit in making an offer soon, as LVMH may be looking to fund a bid for Hermes. LVMH has already purchased a share of the French fashion house.
Diageo seems serious; its bankers are studying the possibility. If LVMH accepts an offer, Moet Hennessy will join some of the most recognizable names in spirits brands as well as a portfolio of wines that includes the old Chateau and Estates group once owned by the now defunct Seagram Company and that includes Sterling Vineyards, Beaulieu Vineyards, Chalone, and more.