Inside Moët Hennessy’s crisis

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And another scoop: Julius Baer has been ordered to pay more than SFr4mn ($4.8mn) by Switzerland’s financial regulator over anti-money laundering and compliance failings in its handling of high-risk clients.

In today’s newsletter:

The big test within the Arnault empire 

The wedding of Alexandre Arnault and Geraldine Guyot in 2021 was a star-studded affair.

Rapper Kanye West, dressed in a black Balenciaga suit and mask, serenaded the lovers with hits including “Runaway” and “Flashing Lights”, as stars such as tennis icon Roger Federer looked on.

Among the celebrities in attendance at the two-day ceremony in Venice was American rapper Jay-Z, who had cause to celebrate beyond the Arnault scion’s nuptials.

Earlier that year, the rapper had sold a 50 per cent stake in his champagne brand, Armand de Brignac, to Moët Hennessy — LVMH’s wine and spirits division, part of the luxury empire controlled by billionaire Bernard Arnault and his family.

Forbes estimated that year that the deal, together with the sale of his stake in streaming business Tidal, had lifted Jay-Z’s net worth by 40 per cent to $1.4bn.

For Moët Hennessy, though, the acquisition was part of a hit-and-miss deal spree totalling nearly €2bn. It included several transactions that have not delivered as promised. 

The acquisition drive and other decisions at LVMH’s wine and spirits division have compounded the impact of a sharp global downturn in the drinks market, according to multiple sources and documents seen by the FT’s Adrienne Klasa. 

Moët Hennessy went from generating €1bn in cash in 2019 to burning through €1.5bn in last year’s budget.

That downturn is part of a wider global slump in sales of alcoholic drinks, but some of the company’s choices have exacerbated the issue, according to sources with knowledge of the business.

Under former chief executive Philippe Schaus, Moët Hennessy pursued hit-and-miss deals, a lossmaking drive into direct-to-consumer sales and sharp price increases. Yet he ascended to be one of controlling shareholder Bernard Arnault’s close advisers in his two decades at LVMH. 

Prices across the portfolio have risen by well over a third on average since 2019. Meanwhile sales last year fell close to 2019 levels and operating profit margins fell to 23 per cent, below Moët Hennessy’s 30 per cent target.

The company’s direct-to-consumer retailing push is now losing millions of euros per year. 

Moët Hennessy had been a cash cow for LVMH for years. But some complacency following the pandemic boom years has taken its toll, according to one source close to the company: “It got to a point where it looked like Moët Hennessy could do no wrong . . . That’s what got them.”

New leaders were installed at the helm of Moët in February, but they face a major test. 

Tasked with the turnaround: Jean-Jacques Guiony, LVMH’s former chief financial officer, and Alexandre Arnault.

Elliott wins support in Phillips 66 fight

It had been more than a decade since influential proxy adviser Institutional Shareholder Services backed a full slate of board directors nominated by an activist investor in a fight against a large-cap US company. 

Twelve years ago, Elliott Management notched such a victory in its campaign against oil and gas company Hess.

Late on Monday, Elliott repeated the feat with ISS encouraging Phillips 66 shareholders to vote in favour of the hedge fund’s four board nominees ahead of a showdown at the oil refiner’s annual meeting later this month. 

And the similarities between the two campaigns don’t end there.

Both were overseen by veteran Elliott portfolio manager John Pike, and the campaigns called for major asset divestments. In Hess’s case, the company settled in the twilight hours before a shareholder vote. Perhaps that’s the fate that now awaits Phillips 66. 

In its report, ISS took aim at Phillips 66’s poor performance compared with industry rivals, and subpar corporate governance, including a decision to hand chief executive Mark Lashier the role of chair and the company’s failure to overhaul its staggered board election model. 

ISS said Elliott presented a “compelling case for change” as it endorsed the hedge fund’s nominees.

Emboldened by the endorsement of ISS as well as Glass Lewis, another key proxy adviser, Elliott said “it is clearer than ever that urgent and meaningful change is needed in the Phillips 66 boardroom”.

On Tuesday, Phillips 66 barked back.

It said: “Elliott is seeking rapid, irreversible change in pursuit of a short-term thesis that would introduce significant risks to Phillips 66 shareholders.”

The next twist in the tale might be a last-minute settlement between Elliott and Phillips 66, to draw a close to one of the most volatile campaigns in years.

If a settlement does not materialise, Phillips 66 and Elliott will be heading into the unknown.

The activist investor would then face the first full-blown proxy vote against a major US corporation in its history.

Golden passports’ trouble in Europe

For decades, the passports-for-cash industry has been a booming business.

Countries have offered citizenship or residency privileges in exchange for one-off investments. In many countries, that means obtaining citizenship has become purely transactional.

These so-called golden passports have made global travel far easier for wealthy residents from countries that face visa restrictions.

Supporters say the passports drive investment in countries that would otherwise struggle to attract big spenders. Critics argue there’s a darker side: they can be breeding grounds for corruption, tax evasion and money-laundering.

In the EU the naysayers have mostly won out. 

Earlier this month, the European Court of Justice ruled that Malta’s golden passport scheme — which by extension granted applicants EU citizenship — violated the law.

In Malta, the criteria are fairly simple: just give a one-time investment of €600,000 and purchase or rent a property in the country. 

The court ruling dealt a particularly painful blow to one London-based consultancy: Henley & Partners, which helped devise and ultimately popularised the scheme. 

The programme has been hugely lucrative for the firm. In the eight years to the end of 2023, Henley earned more than €55mn through the Maltese citizenship scheme alone.

The FT last month identified more than a dozen people who successfully paid for Maltese citizenship despite being politically exposed individuals, or who later appeared on sanctions lists or were convicted of crimes.

The ECJ was scathing in its ruling. It said Malta had “failed to fulfil its obligations” under EU treaties and rendered “the acquisition of nationality a mere commercial transaction”.

But Christian Kälin, group chair of Henley, was unapologetic. He told the FT’s Laura Dubois and Josh Spero that the Maltese system was “extremely tight” and called the ECJ ruling a “political decision”.

“If Europe decides to go backwards, let them go backwards. But the rest of the world is going forward”.

Job moves

• UnitedHealth chief Andrew Witty has stepped down for “personal reasons”, as the US health insurance company suspended its annual outlook and its shares tumbled. Former boss Stephen Hemsley will take his place. 

• Brevan Howard has hired Carlos Hernandez as its first executive chair, Business Insider reports. Hernandez spent nearly 40 years at JPMorgan Chase, where he was executive chair of the investment and corporate bank.

• Cleary Gottlieb has rehired Breon Peace, the former US attorney for the Eastern District of New York. He previously worked at Cleary for nearly 20 years and will co-head the firm’s litigation group.

• Ducera Partners has named Joseph Leone as a managing director in its capital markets group. He was previously a senior vice-president in the leveraged finance group at Goldman Sachs.

Smart reads

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Barca blues FC Barcelona beat rivals Real Madrid in a thrilling El Clásico on Sunday, setting them up for another La Liga title. But off the pitch, the club’s stadium rebuild has been beset by delays, the FT writes.

The Post The Washington Post thrived in Donald Trump’s first term. But now it’s fighting to survive, writes The New Yorker in this deeply reported account of the paper’s struggles.

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