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Diageo (DGE) is set to pay up to $1bn (£790m) for an upmarket tequila brand started by Hollywood A-lister George Clooney and two friends as the drinks giant aims to tap growing demand for premium tequila.
The fast-growing US brand represented an “exciting” opportunity for Diageo to strengthen its grip in the booming category, the group said.
Casamigos, which means ‘house of friends’, was created in 2013 by founders Clooney, Rande Gerber, who is married to supermodel Cindy Crawford, and real estate developer Mike Meldman.
The transaction values Casamigos at up to $1bn, with Diageo to pay $700m (£553m) initially and a further potential $300m based on future performance over the next 10 years. Diageo added the deal – and the future earn-out – reflected the brand’s “exceptional” growth trajectory and upside potential.
Casamigos sold more than 120,000 cases in 2016 alone, primarily in the US, and record a compound annual growth rate (CAGR) of 54% in the past two years. The brand is on track to reach over 170k cases by the end of 2017.
Diageo said the three founders would continue to be involved with the business to ensure the continued momentum of the brand in the US, as well expanding overseas.
“If you asked us four years ago if we had a $1bn company, I don’t think we would have said yes,” Clooney said. “This reflects Diageo’s belief in our company and our belief in Diageo. But we’re not going anywhere. We’ll still be very much a part of Casamigos. Starting with a shot tonight. Maybe two.”
Tequila represents only about 1% of Diageo’s total sales, but it grew at area 8% last year, the fastest growing category alongside gin.
Diageo CEO Ivan Menezes added: “We are delighted to announce this transaction today to extend our participation in the tequila category.
“It supports our strategy to focus on the high growth, super-premium and above segments of the category. With the global strength of Diageo we expect to expand the reach of Casamigos to markets beyond the US to capitalise on the significant international potential of the brand. We look forward to building on the remarkable success of Casamigos to date.”
Deirdre Mahlan, Diageo president of North America, added Casamigos would play a complementary role alongside Tequila Don Julio, which Diageo acquired in 2015.
Gerber said: “We are extremely excited to team up with one of the largest, most respected spirits companies in the world. What started from a friendship and an idea to create the best tasting, smoothest tequila as our own house tequila to drink and share with friends, has quickly turned into the fastest growing super-premium tequila.
“Casamigos has always been brought to you by those who drink it and we look forward to continuing that, working alongside the expertise and global reach of Diageo. Now even more people will be able to enjoy and experience our love and passion for Casamigos.”
The acquisition – to be funded through existing cash resources and debt – is expected to close in the second half of 2017, subject to regulatory approval.
Shares in Diageo have opend down 0.9% to 2,353.5p as the markets digest the news announced last night.
Morning update
It’s another quiet summer’s morning in terms of news on the London Stock Exchange.
The FTSE 100 opened down once again this morning, sliding 0.5% to 7,410.70 points.
B&M European Value Retail was also down another 1.4% to 335.2p, along with TATE & Lyle (TATE), down 1% to 717p, and Tesco (TSCO), down 0.9% to 166.4p, Morrisons (MRW), down 0.8% to 245.7p, and Sainsbury’s (SBRY), down 0.5% to 252.1p.
WH Smith is back up 0.5% to 1,727p, Imperial Brands (IMB) is also up 0.4% to 3,561.5p, and PZ Cussons (PZC) has registered a 0.4% rise to 353.9p.
Yesterday in the City
Whitbread (WTB) leapt 3.4% higher to 3,9854p as the business said it had a “good” start to the year. Sales rose 7.6% in the first quarter, with like-for-like growth of 2.9%, as Premier Inn registered a 9.2% increase. But Costa sales continued to slow, with like-for-like growth of 1.1% compared with 2.6% a year ago.
Other winners in grocery and fmcg were few and far between yesterday. PureCircle (PURE) increased 2.9% to 340p, Nichols (NICL) was up 2% to 1,910 and Premier Foods (PFD) rose 1.3% to 40.3p.
The FTSE 100 fell almost 50 points on Tuesday’s close by lunch time as oil prices remained low and the Queen’s Speech did nothing to improve uncertainty in the UK. The index closed 0.3% down at 7,447.49 points and recovering 27 points in late trading.
Big fallers in grocery and retail included, WH Smith (SMWH), down 2.7% to 1,718p, B&M European Value Retail (BME), down 1.5% to 340p, Dairy Crest (DCG), down 1.1% to 631.5p, and Greggs (GRG), down 1.1% to 1,117p.
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