Guinness and Grand Met blend to product cocktail worth £24bn

THERE could be a few sore heads on the London Stock Exchange this morning, after yesterday's staggering merger between the drinks giants Guinness and Grand Metropolitan.

The new company - GMG Brands - becomes the world's seventh largest food and drinks conglomerate, and Britain's eighth largest quoted company of any kind. The merger combines Guinness's stout, Scotch whisky and gin products with Grand Met's vodka, Cinzano and food interests into a powerful £24 billion sterling cocktail.

But while the name of Guinness plc is submerged in the bland new title, fans of the St James's Gate product need not worry about the name of the pint changing. And if you hold shares in either of the companies and you are not one of the 2,000 expected redundancies worldwide, GMG is definitely good for you.

News of the merger boosted share prices in both companies by more than 15 per cent, as investors were cheered by expected annual savings of £175 million sterling and by a planned cash handout to shareholders of 60p a share.

Guinness Ireland said the redundancies - from an international workforce of 85,000 - would not impinge on the 2,300 strong Irish workforce. Indeed, according to one Dublin analyst, the merger means very little to Ireland, whose association with the business is mainly sentimental.

The deal does, however, unite two of this State's most successful drinks exports, because Grand Met owns the Bailey's brand.

From modest origins in 18th century St James's Gate, Guinness has gone on to become a huge international success story.

Founder Arthur Guinness took a 9,000 year lease on the site of a disused brewery in 1759 at a rent of £45 a year, and his embryonic empire consisted of a mill, two malthouses, stables for 12 horses and a hay loft.

His first exports - 6.5 barrels - left Dublin for England 10 years later. And despite the belief of aficionados that the product doesn't travel, it is now sold in 150 countries worldwide and brewed in 50.

The success was also achieved in the teeth of another popularly held prejudice - that nobody outside of Ireland can pull a proper pint.

But such opinions, true or otherwise, help to sustain the brand's home supporters in the belief that, while the profits may be British, the cultural icon that is Guinness remains distinctly Irish.

The merger gives Guinness an increased interest in North America through Grand Met's Pilsbury and Burger King food divisions. Pilsbury brands include Green Giant vegetables and Haagen Dazs ice cream.

In spite of the size of the merging giants, they both said they did not expect to run into merger/monopoly regulatory problems with the European Union, in the US or elsewhere.

The companies said they would make an estimated £175 million in savings by the third year by integrating the sales forces and other economies.