LVMH victorious in battle for Glenmorangie

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Glenmorangie, one of Scotland's best-known single malt Scotch
whisky producers, has ended its two-month search for a buyer. The
new owner of the company will be Moet Hennessy Louis Vuitton
(LVMH), the French luxury goods group, which beat off competition
from compatriot Pernod Ricard with a £300 million offer.

The battle for control of Glenmorangie began back in August when then company's leading shareholders, the McDonald family, announced that they wanted to sell their stake in the firm.

With such a strong brand and a growing business - Glenmorangie overtook Glenfiddich last year to become the biggest-selling malt whisky in the UK with volumes in excess of 2 million cases - there was inevitably a lot of interest in the company, whose brands also include Glen Moray and Ardbeg single malts and blends The Bailie Nicol Jarvie, James Martin's and Highland Queen, although LVMH and Pernod soon emerged as the front runners.

Pernod was perhaps a surprise bidder, given its already substantial holdings in the Scotch whisky sector, but it argued that most of its business was in the premium blended market (where it owns market leader Chivas Regal) and not in single malts (where it owns the relatively small Glenlivet brand), and that the addition of Glenmorangie's brands would not lead to any significant competition concerns.

Ultimately, it was the price tag which proved too much for Pernod Ricard, which announced yesterday that it was withdrawing from the bidding, even though initial estimates had valued Glenmorangie at around the £300 million mark.

The successful offer was in fact a 6 per cent premium to Glenmorangie's current market capitalisation of £282 million

LVMH, whose drinks brands include some of the most prestigious names in the drinks industry such as Dom Perignon, Veuve Cliquot, Hennessy and Chateau D'Yquem, will now add a first Scotch whisky brand to its upmarket portfolio, moving it closer towards the business model adopted by most of the leading companies, which are building strong brands in most segments of the alcoholic drinks market.

But while Pernod - or indeed any other company with an existing Scotch business - would probably have integrated the Glenmorangie distilleries within its existing operations, creating cost synergies, LVMH will run its new whisky company as a stand-alone subsidiary, arguing (correctly enough) that the current management had done an excellent job at developing the business and were likely to continue doing so.

The challenge for LVMH now will be to replicate Glenmorangie's strong domestic position on the international stage. "The Glenmorangie brand has been successfully built into one of the leading Scotch malt whiskies in the UK, but has a small share of export markets,"​ the company said in a statement.

" Moet Hennessy has specific skills and experience in the marketing of luxury wines and spirits brands, and a strong track record, and we believe that Glenmorangie has potential to grow faster and more profitably within Moet Hennessy than as a stand-alone company."

All of which does not bode well for the future of Glenmorangie's current distribution agreements with Bacardi Martini, the rum maker which was also thought to be interested in acquiring the whisky maker.

Bacardi Martini distributes Glenmorangie in Germany, Spain, the Netherlands, Austria, Switzerland, France, Italy, Belgium and Portugal, as well as the UK, and also distributes Ardbeg in Germany, Switzerland and the Netherlands, but could find itself stripped of the rights if LVMH decides to push Glenmorangie's brands through its own channels.

But Europe, in fact, is probably less important than the US, the biggest single export market for Scotch whisky, with total sales of £329 million there last year, but where Glenmorangie's brands have a relatively limited presence.

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