DIAGEO yesterday refused to comment on renewed market speculation that it was putting its Spanish CruzCampo beer subsidiary up for sale as part of its drive to dispose of non-core brands.

But City analysts said such a move was likely and would make good sense, given Diageo's drive to focus on high margin businesses with good growth potential.

Carlsberg, which already owns a 10% minority stake in CruzCampo, and Heineken, which owns El Aguila, Spain's other main brewer, are considered the most likely buyers.

CruzCampo is Spain's leading brewer with 26% of the local market, but profits have declined markedly since Guinness bought it for the very full price of #533m in 1991.

Soon afterwards a recession knocked the bottom out of the Spanish beer market and its has only recently begun to recover.

Despite heavy rationalisation, involving the closure of four breweries and the loss of 1300 jobs, CruzCampo's annual profits have declined to around #30m from #60m when Guinness bought it eight years ago.

Analysts reckon the company would sell for between #300m and #400m, leaving Diageo - which was formed by the merger of Guinness with Grand Metropolitan - with a heavy loss.

Diageo began selling off non-core drinks brands last month when it disposed of a range of North American spirits and liqueurs for #200m. The group made clear then that the next step would be to review its drinks portfolio in Europe.

The disposal of CruzCampo would be unlikely to dent sales of Guinness stout in Spain, since the company merely acts as a distributor for Diageo's flagship beer. It does not brew Guinness under licence.