The world's largest producer and distributor of alcoholic beverages, Diageo plc, is planning to add Hennessy, Dom Pérignon, Moët & Chandon and Krug among other high street beverage brands to its already existing impressive portfolio.

Diageo hopes to acquire the remaining stock it does not own of LVMH's Moët Hennessy, in a deal  estimated at around €12 billion.

However, London-based Diageo, which holds a 34-per cent stake in Moet Hennessy, has not made an unsolicited offer, but may be interested in a deal, if approached.

While Diageo has refused to coment, the French company has denied being in talks for a stake sale. It said in a press release today that it ''officially denies reports in certain newspapers today that suggest the group is in discussions to divest Moët Hennessy, its Wines and Spirits division. LVMH confirms that no such negotiations are taking place.''

The Daily Telegraph reported that a source at LVMH told the paper that the statement referred to reports in newspapers that both the companies had officially started discussion on the sale, which was not the case since currently only informal talks are going on.

Diageo is reported to have received the green signal from its bankers and institutional investors to proceed with the talks to acquire rest of the Moet Hennessy stock. Diageo's bankers are reported to have been working out the modalities of the deal for weeks and hence the alcoholic beverage makerhas not yet made any offer.

Reports say that despite being in exploratory talks, LVMH is still not firm about divesting Moët Hennesessy.

Citing people close to the developments, the London-based Financial Times reported that France-based LVMH Moët Hennessy Louis Vuitton, the world's leading luxury products conglomerate, had approached Diageo earlier this year to explore the possibility of the UK giant buying the rest of the Moët Hennessy stock, leading to early informal talks between the two.

Diageo is planning to raise funds for the acquisition by planning a £5-billion share sale and with Goldman Sachs as its advisor, it has approached Credit Suisse Group AG and other banks for additional funding.

Diageo operates in more than 180 markets and employs more than 22,000 people in 80 countries whose net value is estimated to be £24.6 billion and holds an impressive variety of brands in its stable such as Johnnie Walker, Bushmills Irish Whiskey, Baileys Irish Cream, Smirnoff, Tanqueray Gin, Guinness, Crown Royal, Beaulieu Vineyard and Sterling Vineyards wines, and José Cuervo.

Last year, Diageo reported operating profits of £2.2 billion in the year to 30 June, meeting its 2008 target of 9-per cent growth on sales that jumped 7 per cent to £10.64 billion. (See: Diaego on a high with £2.2 billion operating profit in 2007-08)

The falling beer markets in Britain and Europe has made Diageo increase its range of super-premium products, by acquiring a 50-per cent stake in Dutch vodka brand Ketel One. It has also added Zacapa rum and Rosenblum Cellars wine to its stable of brands.

But it needs to add a good brand of cognac and champagne to its stable, which it can do with the acquisition of the remaining stock of Moët Hennessy.

Some time in the future, Diageo may think about adding some fine bourbon's to its cellar like Jack Daniels or Jim Beam of the US.

But the big poser is whether Bernard Arnault, chairman, CEO and largest shareholder of LVMH is willing to sell the wine and spirits division of the conglomerate as Moet Hennessy is one of the biggest revenue contributor to the company.

Arnault is also France's richest man, ranking 17th in the Forbes rich list with an estimated worth of $16.5 billion. He also holds 47 per cent of LVMH's stock.

Last year, LVMH reported total revenues of €17.2 billion. The group employs 77,000 people globally with has a retail network of more than 2,300 stores.

Commentators feel that if Arnault sells Moët Hennessy, which he need not, since his company is flush with funds, it would leave the conglomerate with only its fashion business, leather goods and watches although it boasts of 60 big brands like Christian Dior, Givenchy, Mercier, Louis Vuitton and Tag Heuer among others.