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UPDATE 1-LVMH denies plans to sell drinks unit to Diageo

* LVMH denies plan to sell drinks unit to Diageo

* Diageo declines comment

* Diageo shares hit record high, LVMH firmer

(Writes through, adds detail and background)

PARIS/LONDON, Oct 21 (Reuters) - French luxury goods group LVMH LVMH.PA denied on Thursday it had plans to sell its 66 percent stake in its drinks business Moet Hennessy to the British drinks group Diageo Plc DGE.L.

Shares in both groups jumped on talk that Diageo, which owns the other 34 percent of Moet Hennessy, was planning a 12 billion euro ($16.7 billion) plus bid to control the whole business, which makes Moet & Chandon champagne and Hennessy cognac.

An LVMH spokesman said the company had already denied any talk of a LVMH plan to sell Moet Hennessy to Diageo. Speculation last arose in April 2009 after reports a possible deal would make strategic senses.

London-based Diageo declined to comment but Chief Executive Paul Walsh has said he would be interested in the 66 percent stake if LVMH’s chief Bernard Arnault was willing to sell. Arnault has given no indication of wanting to sell out.

Diageo shares rose to their highest level since the group was formed in 1997 in a Guinness-Grand Metropolitan merger, to hit 12.40 pounds. They were up 4.3 percent at 12.10 pounds by 1200 GMT.

LVMH shares hit a high of 112.85 euros and were last up 3.4 percent at 112.65euros.

The shares had been pushed higher in earlier trade by strong sales growth figure earlier on Thursday from rivals Pernod Ricard PERP.PA and Remy Cointreau RCOP.PA [nLDE69K16E]. (Reporting by David Jones; Editing by David Holmes) ($1=.7181 Euro)

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