Mr John McGrath, chief executive of Grand Metropolitan has sounded a note of peace in the tussle with rebel shareholder Mr Bernard Arnault, chairman of French luxury goods company LVMH - Louis Vuitton Moet Hennessy.

Mr McGrath, who will fill the role of chief executive of GMG Brands, the name given to the proposed £24 billion pound ($39.2 billion) merger between Guinness Plc and GrandMet, stressed the need to find common ground. `I think the solution is calm, sane negotiation, we have just got to be patient and gradually to try and find the areas of common ground," said Mr McGrath.

"Not to try and deal always with the main problem area but try to find the areas of common ground, and then you try to marginalise the areas of disadvantage. The temptation is always to fight on the areas of disagreement," said Mr McGrath.

This apparent olive branch to the rebel French shareholders was welcomed by LVMH, whose chief executive, Mr Bernard Arnault, has proposed a three-way merger of the spirits interests of Guinness, Grand Met and LVMH. "It is encouraging that Mr McGrath now sees the merits of Mr Arnault's proposals," a LVMH spokesman stated. Mr Arnault has spent much of the last two weeks canvassing Grand Met shareholders in favour of his proposals.

Mr Arnault adopted a more aggressive, combative style two weeks ago, when he began building his stake in GrandMet to its current 11.1 per cent from 6.4 percent, in an effort to block the deal. The current GMG Brands merger plan requires the approval of 75 per cent of GrandMet shareholders. Executives from the three companies have not met since July 15th.

"There does seem to be a big gap between us at the moment but we have got time to resolve this amicably. I don't think it's in the interests of shareholders to settle it hastily," said Mr McGrath. "If you have got the impression that this is a bunch of intransigent Brits who don't want to trade with this guy: that is not true."

Mr Arnault, who has opposed the merger since it was first hatched on May 12th, wants to include Moet Hennessy, the champagne and cognac business of LVMH in a separately listed three-way drinks merger dubbed Drinks Co. He proposed taking a 35 per cent stake in the company in exchange for its 66 per cent holding in Moet Hennessy and its shareholdings in Guinness and GrandMet.

"One common area that I think we are all agreed on is that there are potential synergies by putting Moet Hennessy, UD (Guinness spirits arm United Distillers), IDV (GrandMet's drinks division) together," said McGrath. "To have the number one cognac with Hennessy and the number one, two and three champagne brands is obviously attractive at the right price," he added.

In the LVMH proposal, Mr Arnault argues a three-way drinks merger would produce added cost savings of £65 million over and above the £175 million already identified by Guinness and GrandMet.

"We are not going to comment on whether £65 million is the right number but let's assume there is a number of that sort of shape there. One thing to be determined is how easy it is to achieve that number, what actually has to happen to make it work. And then to say here is some value, right how do we share it.

"We don't share it by £130 million in pre-tax profit going to LVMH shareholders and £130 million coming from our side. Well okay that is his opening gambit. So okay let's work through that and determine what sort of shareholding it should be and how it should be apportioned.

"And that is the common ground. Having found all these benefits, you then get into the harder areas of his theory of conglomerate discounts, but let's see if we can talk through it," said Mr McGrath whose grounding as a nuclear physicist gives him a gift for logical argument conducted at lightning speed.

Mr McGrath strongly rejected Mr Arnault's scheme for splitting up GMG Brands into four separate companies - food, fast foods, brewing and drinks, spinning off GrandMet's hamburger chain Burger king, its foods business Pillsbury and Guinness brewing. This would mean tax costs of an estimated £1.5 billion pounds and destroy shareholder value in many other ways, said Mr McGrath.

The outcome of any three-way merger of Guinesss, GranbMet and LVMH spirits brands could have major implications for Guinness' Irish brewing business and also Cantrell & Cochrane, the Irish drinks group owned jointly by Guinness and one of its major competitors, Allied Domecq.