LVMH plays down talk it could sell rest of wines and spirits unit

LVMH, the world's largest luxury goods group, was yesterday quick to stamp on talk it was in negotiations with Diageo about selling the remainder of Moët Hennessy to the UK-based drinks company and its partner in the upscale wine and spirits business, writes Scheherazade Daneshkhu in Paris .

The Paris-based group, controlled by Bernard Arnault, said it "officially denies reports in certain newspapers today that suggest the group is in discussions to divest Moët Hennessy, its Wines & Spirits division. LVMH confirms that no such negotiations are taking place".

Some analysts said the wording of the denial did not rule out informal talks or negate their initiation should Diageo come up with a good offer to buy out the 66 per cent in Moët it does not own.

But while many analysts could think of good reasons for Diageo to buy, there were fewer who could come up with reasons for LVMH to sell, especially since the company has a strong balance sheet with net gearing of 29 per cent.

Thomas Deitz, analyst at RBS, said: "A sale of Moët Hennessy would come as a surprise to most investors; it is a highly profitable and high quality business, despite the recent significant slowdown in champagne sales."

Wines and spirits, a portfolio that includes Krug and Dom Perignon in champagne, Glenmorangie in whisky and Chateau d'Yquem in wines has been LVMH's most consistently profitable business for years.

However, analysts were agreed that Mr Arnault might choose to sell if he wanted to buy a big luxury goods brand, the routine suspects being Hermès, Chanel or Armani.

Luca Solca, analyst at Bernstein Research, said: "At the extreme, it would possibly make sense for LVMH to sell Moët if it wanted to buy a big watchmaker - for example Richemont or Swatch - but I don't see that happening in the near future and I would question the sense of this anyway."