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Bernard Arnault: A Spirits Race Picks Up Speed


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BERNARD ARNAULT: A SPIRITS RACE PICKS UP SPEED

Bernard Arnault couldn't stay out of the fray much longer. On July 21, the chief of LVMH resigned from Guinness' board in order to pursue his three-way merger proposal for LVMH, Guinness, and GrandMet. His goal: to create a wine-and-spirits giant out of GrandMet's International Distillers & Vintners, LVMH's Mot Hennessy, and Guinness' United Distillers--though Guinness and GrandMet are pursuing a merger of their companies without LVMH.

Resigning from Guinness made it easier for Arnault to sell some of his 14.2% stake. He is using the proceeds to buy more GrandMet stock, bringing LVMH's GrandMet stake to 11.05%. That gives him enough shares to demand a shareholders' meeting to consider his three-way merger proposal ahead of the meeting planned to consider the Guinness-GrandMet plan.

A Guinness spokesman says: "We are confident our shareholders will vote for our proposal." But if Arnault prevails on GrandMet, life could be difficult for Arnault's former chums at Guinness.By Mia Trinephi EDITED BY KELLEY HOLLANDReturn to top

BOEING-McDONNELL GETS A THUMBS-UP

IT WAS A HIGH-STAKES GAME of poker until the last minute, but Boeing managed to win European Union endorsement on July 23 for its $14 billion merger with McDonnell Douglas. Boeing left some chips on the table: It agreed to give up the exclusive-supplier agreements it had negotiated with American Airlines, Delta Air Lines, and Continental Airlines. "If we allow this type of long-term exclusive contract, the competitors will be out of business," complained European antitrust chief Karel van Miert, who worried that the combined company would control 85% of the world's air fleet and shut out France's Airbus Industrie. Now, Boeing is stuck with the generous terms it agreed to when it negotiated the exclusives with the carriers. But Boeing won the big pot: Now there are no obstacles to a final approval of the McDonnell merger, which will be submitted to a shareholder vote on July 25.EDITED BY KELLEY HOLLANDReturn to top

PENNZOIL'S SUITOR IS WILLING TO WAIT

THE BATTLE CONTINUES: Union Pacific Resources is extending until Sept. 24 a $6.4 billion cash-and-stock tender offer for Pennzoil. As of July 21, Union Pacific Resources had the support of holders of 61.5% of outstanding Pennzoil shares. Pennzoil's anti-takeover defenses mean the tender will have little immediate effect. In fact, Pennzoil CEO James Pate continues to reject as "inadequate" Union Pacific's offer. But analysts say the nearly two-thirds of shares tendered may force Pennzoil management to negotiate. Union Pacific Resources has said it may raise its bid if it can review Pennzoil's books.EDITED BY KELLEY HOLLANDReturn to top

WACKENHUT WINS ITS PRISON BID

GO TO JAIL AND COLLECT $300 million. That's what Wackenhut Corrections will get to do in California. On July 22, the company was awarded the largest privatization contract ever for a prison--a 2,048-bed minimum-security facility in Taft, Calif. Wackenhut beat out competitor Corrections Corp. of America. Managing the Taft prison is expected to generate revenues of as much as $300 million over the next 10 years. Wackenhut also is competing for other contracts to manage prisons, and not just in the U.S.: One bid is for a 900-bed detention center for Australia's immigration service. That decision is expected in August.EDITED BY KELLEY HOLLANDReturn to top


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