Guinness looks set to sell its 49.6 per cent stake in the drinks company, Cantrell & Cochrane (C&C), and its 33.3 per cent stake in Edward Dillon, the wine and spirit distributor. This decision is designed to meet the European Commission's competition concerns following the agreement to merge with GrandMet. The sales will take some time. "We have only got word from the Commission. We have to do quite an amount of work yet," a spokesman for Guinness in Dublin said. Guinness has decided to appoint a review team to look at all the options. A spokesman for Guinness in London said this team would decide how much of the shareholdings to sell and how the sale would be conducted. Guinness plans to have reached decisions within 15 months. The formal statement from Guinness merely said the group had agreed "to dispose of certain minority shareholder interests, to ensure continued competition in distribution in Ireland".
The spokesman would not identify the minority interests but informed sources have identified C&C and Edward Dillon.
GrandMet already has a strong presence in the Irish market through Gilbeys, the wine and spirit firm which distributes Smirnoff vodka, Famous Grouse whisky, Martell brandy and Bailey's Cream liqueur. Grants, part of C&C, distributes Courvoisier brandy, Beefeater gin and Irish Mist liqueur.
Edward Dillon distributes Gordon's gin, Black & White whisky, Cossack vodka, Bacardi rum, Southern Comfort whisky and Hennessy brandy. Combined the brands would have a market share of 38 to 39 per cent of the Irish spirit market, according to industry sources. It is understood that the commission considered that this would have been too dominant, and on that basis, would not have approved the merger of Guinness and Grand Met (to be named GMG Brands).
Mr Tony O'Brien, chief executive of C&C, was not available for comment yesterday. And no one was available from Edward Dillon as its management team was on a tour of the Hennessy operations in France.
The other shareholders in Edward Dillon are Hennessy, with 33.3 per cent, and Brown Foreman and Bacardi own the remaining 33.3 per cent.
While it is possible that Guinness may retain a lesser stake in each company, a sale of Guinness's stake in C&C has been widely expected. Allied Domecq owns the majority 50.4 per cent shareholding and it has a first option to acquire the Guinness stake, valued at around £300 million by some market sources. Another option is a sale of the Guinness stake to institutional shareholders and a subsequent flotation of C&C on the stock market with a valuation of more than £600 million. C&C has had a good profit record and generates a strong cash flow. A flotation would be welcomed by institutional shareholders. While the management has not commented on the prospects of going public, such a move would allow the company expand at a faster pace. C&C increased its profits by 10 per cent to £43.1 million and turnover by 14 per cent to £342 million last year.
It had cash of £39 million and generated cash flow of £32 million. The company has estimated that it could spend up to £100 million on acquisitions. In order to meet the commission's competition concerns, GMG has also agreed to divest Guinness's interests in Dewar's and Ainslie's Scotch whisky brands in Europe, to change the distribution of Gilbey's gin and Wyborowa vodka in Belgium and Luxembourg and the Bacardi agency in Greece.
