GUINNESS is coming under pressure to demerge its beer and spirits companies into two separate divisions, according to British newspaper reports.
Mr Bernard Arnault, the chairman and chief executive of LVMH Moet Hennessy Louis Vuitton Group, which owns about 21 per cent of Guinness, is understood to have lobbied senior executives about his demerger plans.
Mr Arnault, who is also a non executive director of Guinness, believes that splitting the two operations along the lines of the split between ICI and Zeneca will enhance shareholder value.
Guinness has about 10,600 shareholders in Ireland who together hold about 2.5 per cent of the company. The Guinness businesses in Ireland would join the new brewing company if its parent company decided in favour of a demerger.
Aside from being the company's birthplace and ancestral home, the St James' Gate brewery is also a key player in the parent company's substantial export business.
No decision has been taken on the demerger, but the plan has been discussed at board level, according to one well placed Guinness source. "The board was not completely opposed to the idea. Everyone is convinced that something has to be done," the Guinness source said. However it is thought that the demerger plan is likely to be resisted by senior executives.
If the demerger went ahead the two new companies would be independent, and both would be publicly quoted. Ironically a split would demerge the two businesses that were locked together in 1986 after Guinness' controversial £2.7 billion sterling takeover of Distillers.
News of the discussions surrounding a possible demerger comes after last week's lacklustre results from Guinness. Profits at the spirits and brewing giant fell by 4 per cent to £876 million sterling on a flat turnover of £4.7 billion.
Guinness shares, which hit a peak of 635p in May 1992, are now trading at 466p and have underperformed the FT 100 by 45 per cent over the past four years. At the current level the company has a market value of £9.4 billion, with LVMH's stake worth about £1.9 billion compared to £2.6 billion at its peak.
Last Friday, in a move aimed at enhancing its own share prices Guinness bought about 5 per cent of its stock in a £460 million buy back. Analysts said the repurchase would return some of the company's mounting cash pile to shareholders, and would also raise the stock's value by reducing the number of shares in circulation.
