Moët Hennessy pays out in Diageo dividend dispute

Diageo has prevailed in its dispute with LVMH over a £161 million dividend due from its 34% holding in Moët Hennessy.

The wrangle arose when LVMH, Moët Hennessy’s parent company and the world’s largest luxury goods company, failed to pay Diageo a dividend for the financial year that ended on 31 December 2019, despite paying its other shareholders €2.4 billion on the due date in July last year,

As a result, Diageo threatened to open arbitration proceedings under the terms of the Partners Agreement which governs dividend policy and minimum annual dividend requirements for MH.

The groups have been linked since 1994 when they took a cross-holding in each other and set up various sales and distribution alliances, not least in China.

LVMH has long since divested its holding in Diageo but the UK company has retained its stake in MH, especially as it does not have either Cognac or Champagne brands. 

Indeed, there has been speculation over the years that in the unlikely event that LVMH might wish to sell its drinks division, Diageo would be keen to discuss a price.

Today Diageo revealed that it had received a £80m payment in October and that earlier this week LVMH had agreed to pay the remaining £81m. Consequently Diageo will end the arbitration process and regard the matter as closed.

Neither side has commented on the reason for the initial non-payment of the dividend, but speculation that Moet Hennessy, LVMH’s drinks arm, was experiencing cash flow difficulties seem wide of the mark.

Although all luxury goods and premium drinks companies suffered a severe body blow in the first half of 2020 due to the coronavirus pandemic, LVMH is capitalised at €250 billion and controlled by Bernard Arnault, one of the world’s five richest men according to Barrons.

The pandemic prompted LVMH to delay announcing a dividend for the first six months of 2020 until October until it saw how its trading in the second half of the year was panning out.

The French group completed the successful €14.7 billion acquisition of US jeweller Tiffany earlier this month.