Drinks giant, Diageo, has announced the resolution of its long-running dispute with Mexican tequila company, Jose Cuervo. Under the settlement, Diageo will return its 45% stake in Jose Cuervo while retaining distribution rights to the brand in the US. As part of the deal, Jose Cuervo will transfer back to Diageo its ownership interest in certain Diageo brands in Mexico.

A US court had ruled in 2000 that Jose Cuervo was within its rights to terminate its distribution deal with Diageo which contributes some £320 million to Diageo's turnover. The new distribution deal in the US runs until 2013.

"I am delighted that we have reached agreement on the future of the Cuervo brand with Jose Cuervo," said Diageo CEO, Paul Walsh. "Jose Cuervo is a company of strong traditions with whom we have had a long and successful relationship. This agreement means that we will continue to work together to maintain the success of the Cuervo brand as part of Diageo's premium drinks portfolio."