Guinness maker mulls separating or selling beer brand - Bloomberg

Diageo, one of the world's largest alcohol producers, which owns the Guinness and Smirnoff brands, is considering separating or selling Guinness, Bloomberg sources reported. The beer brand is valued at more than $10 billion. In an effort to boost growth, the company is also considering options for its stake in Moet Hennessy, part of LVMH, a global leader in luxury goods. Following the Bloomberg report, Diageo shares in London posted their best rise in more than four years.

In an attempt to accelerate its growth, British alcohol producer Diageo is considering the option of selling the Guinness beer brand or separating it into a separate company, Bloomberg sources reported. According to them, the value of the brand is estimated at more than $10 bln. Diageo may go both ways at the same time: to consider the listing of Guinness and at the same time to assess the interest of potential buyers, the sources add.

Diageo's partnership with LVMH may also undergo a revision, Bloomberg sources add. Diageo holds a 34% stake in LVMH's beverage division, Moet Hennessy, which produces champagne and cognac. Diageo may try to increase its stake in the partnership or withdraw from it entirely, Bloomberg claims. If Diageo decides to sell its stake, LVMH is obligated to buy it back at a 20% discount from market value, according to their agreement.

No final decisions have yet been made by Diageo, and there is no certainty that any deals will take place, Bloomberg noted. Diageo and LVMH declined to comment to the agency.

At the end of trading in London on January 24, Diageo shares added 4.25% and reached the maximum closing price for the last two weeks. During the trading session, they rose even more - by 6.8%, which was their biggest increase during the day in more than four years, notes Bloomberg. Still, the securities are down by about 12% over the past year.

In New York, the company's depositary receipts finished Friday's trading session up 4.6%, reaching their highest closing price since Jan. 8. Over the past 12 months, the value of Diageo securities in New York has dropped by 14%.

Bernstein analyst Trevor Sterling believes that Diageo's possible decision to take full control of Moet Hennessy would require issuing shares to raise capital or sell the beer business, Bloomberg reports. Former Diageo CEO Ivan Menezes has always said that if Moet Hennessy becomes affordable, Diageo would be interested in buying it, Sterling added.

Abrdn fund co-manager Rawanna Ivory notes that Diageo has the strongest portfolio in the industry and the company needs to focus on its core brands.

At the same time, Fundsmith fund manager Terry Smith completely got rid of his Diageo shares in early January, Bloomberg noted. Smith justified his decision with concerns about the company's management and its growing vulnerability to popular weight-loss drugs that could restrict alcohol consumption, the agency explained.

According to data MarketWatch, 11 out of 21 analysts in total recommend Diageo securities to buy, assigning them ratings of Buy and Overweight. Another six advise holding previously purchased securities in the portfolio (Hold), while the remaining four suggest selling them (Sell).

Diageo and its competitors have seen a drop in demand due to inflation and rising interest rates, Bloomberg notes. Retailers and wholesalers have reported excess inventory. In July 2024, Diageo reported a decline in annual sales - the first time since the pandemic. The company is thinking of selling the Ciroc vodka brand and other small or unprofitable brands, the agency added.

This article was AI-translated and verified by a human editor