Diageo exploring potential spin-off or sale of Guinness, Bloomberg Information experiences

(Reuters) – Diageo (LON:DGE), the world’s prime spirits maker, is exploring a possible spin-off or sale of beer model Guinness and is reviewing its stake in LVMH’s drinks unit, Moet Hennessy, Bloomberg Information reported on Friday, citing folks aware of the matter.

Information a few potential sale of the beer label, a star performer in Diageo’s portfolio, helped carry Diageo’s shares virtually 4% increased, turning into the highest proportion gainer on the blue-chip index. Nevertheless, some analysts and one supply aware of the state of affairs mentioned a Guinness sale proper now didn’t make sense.

Diageo declined to touch upon market hypothesis; LVMH declined to remark.

Guinness is an outlier in Diageo’s enterprise, which consists principally of spirits slightly than beer, however its efficiency lately has outshone that of key liquor labels like Johnnie Walker whisky.

Spirits gross sales have struggled as a post-pandemic increase in demand for expensive bottles of liquor went into reverse. In the meantime, Guinness gross sales have grown by double digits yearly since 2021, with its zero-alcohol model additionally surging.

Its current success may make Guinness a sexy asset. It will probably be valued at above $10 billion, Bloomberg reported, citing the sources.

Diageo’s liquor manufacturers additionally provide the next margin and usually, drinkers in developed markets are shifting away from beer and in the direction of spirits-based drinks like cocktails.

However on the identical time, Guinness’ success additionally left analysts like Laurence Whyatt at Barclays (LON:BARC) questioning why Diageo would wish to promote it.

“I might be very shocked if Diageo needed to promote Guinness,” he mentioned, including it was uncommon for firms to wish to promote their best-performing belongings.

A supply aware of the state of affairs agreed that it is mindless for Diageo to promote Guinness within the close to time period given its efficiency, including Diageo doesn’t want the cash and CEO Debra Crew had mentioned publicly how a lot she likes the label.

Bloomberg additionally reported that Diageo may look to deepen its possession within the Moet Hennessy enterprise, or exit altogether.

In a observe earlier on Friday, Bernstein analyst Trevor Stirling mentioned Diageo taking full management of the LVMH wine and spirits division would probably necessitate “a really reluctant disposal of beer/Guinness”.

(This story has been refiled to appropriate the reporter’s title within the signoff, no change to textual content)