Diageo and LVMH in dividend dispute
The world’s biggest premium drinks company is in dispute with the world’s largest luxury goods group over a missing dividend payment.
When it released its annual results yesterday, Diageo revealed in the notes accompanying the accounts that it has begun arbitration proceedings against LVMH over non-payment of a £166 million dividend it was expecting as a 34% shareholder in the French group’s wines and spirits subsidiary Moet Hennessy (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.
Their relationship is governed by a Partners Agreement under which Diageo believes it is due the £166m dividend for the financial year ending 31 December 2019. On July 9, LVMH paid out €2.4 billion to its shareholders, but not the £166m Diageo believes it is due so it has triggered the arbitration process.
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The six months since last Christmas have been torrid for luxury goods groups, including LVMH, whose revenues slumped by 28% in the six months to the end of June. It is France’s largest company and was valued at the start of this year at more than €200 billion.
As a signal of the hit its business has taken, especially in travel retail, it did a U-turn on what would be its biggest ever deal, the proposed €13.7bn takeover of Tiffany, the jeweller. That was overwhelmingly approved by shareholders at the annual meeting in February, but in June LVMH said it no longer planned to buy Tiffany shares in the market, leaving the takeover in considerable doubt.
At the same time, LVMH also postponed setting an interim dividend for the first six months of the year until October.
Diageo has declined to elaborate further on the wrangle and LVMH has not responded to the drinks business‘ request for a comment on the dividend dispute.
