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Diageo demands €181m dividend from LVMH

Moet & Chandon bottles
Moet & Chandon bottles

The world’s largest spirits manufacturer has locked horns with the world's biggest luxury goods firm over a €181m unpaid dividend.

Guinness and Johnnie Walker owner Diageo said it has launched arbitration proceedings against LVMH over its refusal to go ahead with the €181m (£166m) payout.

The pair have a relationship that dates back to 1994 when they each invested in the other company.

LVMH has since ditched its stake in Diageo, but the UK firm still owns 34pc of LVMH’s wine and spirits unit as part of a joint venture.

The French conglomerate – controlled by billionaire Bernard Arnault – owns the remainder of the Moet Hennessy division, which includes brands such as Dom Perignon and Veuve Cliquot champagne and Glenmorangie whisky.

Bernard Arnault | From property to a life in luxury
Bernard Arnault | From property to a life in luxury

In accounts published last week, Diageo said a partners’ agreement that governs its investment means it is entitled to a share of the division’s annual profits in the form of a dividend.

Moet Hennessey is understood to have initially recommended paying a dividend totalling €531m for 2019, of which Diageo would have been entitled to €181m.

However, Moet Hennessey has since cancelled the payout to Diageo despite its parent group’s decision to grant investors a dividend totalling €2.5bn for 2019.

Diageo said that it believes the failure to pay up constitutes a breach by LVMH of the partners' agreement.

In its accounts, the company said: "Diageo has commenced arbitration proceedings under the partners' agreement in respect of this dispute."

LVMH’s decision to withdraw the dividend is understood to have been linked to concerns related to the coronavirus outbreak.

Profits at LVMH rose 15pc to a record €11.5bn in 2019, while sales of its wine and spirits brands was up 6pc to €5.7bn.

LVMH declined to comment.