We could accept a stake lower than 30 per cent and we would consider taking a cash payment for some of our assets," said a LVMH spokesman yesterday.Guinness and GrandMet still looked set last night to spurn a three-way merger of the drinks businesses and plough on with their own straight merger even though Mr Arnault is prepared to reduce his stake."Even if he had a 20 per cent stake he would still have a majority holding in the spirits business where most of the cost savings would be had and where the growth potential is the greatest. A demerger of our food and brewing businesses would destroy value," a GrandMet spokesman said yesterday.An overwhelming number of big investors in GrandMet, headed by George Bull, and Guinness, led by Anthony Greener, said privately they would reject Mr Arnault's original proposals that would have given him a commanding shareholding.Most of the UK companies' institutional shareholders believe a straight merger between Guinness and GrandMet offers the best deal and are not willing to entertain the idea of a three-way merger of the spirits businesses. Fierce criticism by institutional shareholders in Guinness and GrandMet has forced Mr Arnault to amend his alternative plans to merge the drinks businesses of the two UK companies with the Moet Hennessy champagne and Cognac operations of his French luxury goods group, LVMH. Mr Arnault yesterday conceded that his demands for a 35 per cent stake in a merged drinks group, which would include the IDV business owned by GrandMet and the United Distillers arm of Guinness, were excessive. "We would be willing to accept a lower stake in the combined spirits business. The most recent one was Washington's use of the Helms-Burton Act to penalise European companies that had dealings with Castro's Cuba.Comment, page 23. Bernard Arnault was yesterday forced to make an embarrassing climbdown just 24 hours after he launched an audacious attempt to scupper the pounds 23bn merger between Guinness and Grand Metropolitan. Commission sources say it could also seize any new Boeing jets being delivered to customers in Europe as payment of the fine.It is the latest in a long line of trade disputes between Europe and the US.

"This is not a trade issue, this is a competition question," said Mr Van Miert's spokesman.But competition lawyers in both Brussels and Washington sense that the Commission's objections arise at least in part from the desire to strengthen the position of Airbus, which will be left as the only rival manufacturer of large commercial aircraft."People are sensing that this is all politically motivated, that the EU is protecting its champion and the US is protecting its champion," said one lawyer.The Commission is seeking to re-open a bilateral agreement on aircraft subsidies signed in 1992 which limits indirect support and caps direct launch aid at 33 per cent of the cost of new programmes.If the Commission goes ahead with its threat to veto the merger it could fine Boeing 10 per cent of turnover as well as fining any EU company that does business with Boeing. The EU is demanding concessions from Boeing on the exclusive supply deals it has signed with US airlines and spill-over of funds from defence contracts into civil airline programmes.However, America's Federal Trade Commission has approved the deal without conditions, saying it will have no impact on competition.The EU continues to insist that politics are not involved. there are no political considerations."The EU's panel of anti-trust advisers has concluded that the deal should be blocked because it will give Boeing a hold over 84 per cent of the world aircraft fleet. The Republican Senator for Boeing's home state of Washington, Slade Gorton, said: "The sole reason for the European Commission's criticism and imminent disapproval of the merger is to gain an unfair competitive advantage for Airbus."But the President of the Commission, Jacques Santer, hit back immediately, telling a news conference: "We are looking at the Boeing-McDonnell Douglas merger according to very objective criteria ... He said: "I'm concerned about what appear to be the reasons for the objection to the Boeing-McDonnell Douglas merger by the European Union. And I think that it would be unfortunate if we had a trade stand-off with them."A spokesman in Brussels for the EU Competition Commissioner, Karel van Miert, said it would take a "miracle" to break the deadlock before the EU made its final ruling on the merger in five days' time.

It has already ruled provisionally that the merger is anti-competitive and has told Boeing that it must offer more concessions to allay its concerns about domination of the civil aircraft market.The US Senate unanimously approved a motion condemning the EU for its threat to block the merger. President Bill Clinton warned yesterday that Europe and the US were in danger of talking their way into a trade war over the $14bn (pounds 8.5bn) merger of Boeing and McDonnell Douglas. His warning came as Boeing and the European Commission appeared no nearer to agreeing a deal to prevent the EU vetoing the merger and imposing punitive fines on the US aircraft manufacturer. Amid rising tensions on both side of the Atlantic, fuelled by US allegations that Europe was opposed to the deal for nakedly political reasons, President Clinton told a White House press conference: "There's an orderly process for our handling this and I think we'd better let the orderly process play itself out before we talk ourselves into a trade war."Although the President said that he thought a trade war could probably be avoided, he indicated that retaliatory action would follow any EU veto of the Boeing deal. The office has come in for widespread criticism since its founding in 1988 after failing to secure convictions in a number of high-profile prosecutions.In a letter to the Attorney- general on Monday, Mrs Wright called for the creation of a single investigatory body to replace the current system which sees responsibility for prosecuting fraud split between the SFO, the Crown Prosecution Service and the Department of Trade and Industry. She said it was time for recommendations made 11 years ago by Lord Roskill to be enacted..