The whisky galore merger
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Your support makes all the difference.Two of Britain's leading drinks companies caught the stock market by surprise yesterday when they agreed a pounds 23bn mega-merger that will create the world's largest spirits group.
The deal brings together Guinness and Grand Metropolitan to form a new company, GMG Brands. It will be the worlds' seventh largest food and drinks group, behind giants such as Coca-Cola, Pepsico and McDonald's. With a stock market value of pounds 21bn, it will also be the United Kingdom's eighth largest company.
Hatched over a dinner between the two chairmen a month ago, the deal brings together a breathtaking collection of major brands which include Guinness's Bell's scotch whisky and Gordon's gin and Grand Met's Smirnoff vodka, J&B whisky and Bailey's liqueur.
It also unites Grand Met's food interests, which include the Burger King restaurants and Haagen Dazs ice cream, with Guinness Brewing Worldwide, which produces the famous stout.
The new company confirmed that there would be around 2,000 job losses from its combined total of 85,000. However, it said these would be spread around the world with no single country bearing the brunt.
The deal could signal a wave of mergers and takeovers in the fragmented spirits industry which has been plagued by stagnant sales volumes and an inability to raise prices in mature markets in industrialised countries. Grand Met's chairman, George Bull, said: "Scale is critical to compete globally in these markets today. This is a win-win situation."
It could also lead to higher spirits prices, although both Guinness and Grand Metropolitan denied this yesterday. The Consumers' Association said it would be looking at the deal. The merger still has to be cleared by the European regulatory authorities.
GMG Brands will account for almost 10 per cent of world spirits sales, which total 2.2 billion cases. It will have a turnover of almost pounds 13bn and profits of pounds 2.2bn. Shareholders in the two groups will receive a special dividend of at least 60p per share as GMG Brands plans to return pounds 2.4bn of cash to them.
The deal means the Guinness name will disappear as a corporate identity after nearly 250 years. Founded in Dublin in 1759 it changed its name to Guinness from Arthur Guinness & Sons in 1985. A year later it launched the controversial bid for United Distillers which subsequently led to the jailing of the then chairman, Ernest Saunders.
Shares in both companies rose yesterday as the City welcomed the merger.
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