Diageo has agreed to acquire Don Papa Rum, a super-premium, dark rum from the Philippines, in a deal worth up to €438m (£385m)

Diageo will pay €260m up front for the brand, with a further potential consideration of up to €177.5m through to 2028 subject to performance and “reflecting the brand’s current growth potential”.

Diageo said the acquisition gives them increased access to the fast-growing ‘super-premium plus’ segment of the rum category, which has seen a five year compound annual growth rate of 18% in Europe and 27% in the US.

Through the same period, Don Papa Rum consistently outperformed the market in Europe, it noted, delivering a compound annual growth of 29%.

The brand was launched in 2012 by entrepreneur Stephen Carroll, together with Andrew John Garcia, and is currently available in 30 countries, with France, Germany and Italy being its largest markets.

Carroll will remain involved with the brand, working alongside Diageo to build on Don Papa Rum’s growth potential.

John Kennedy, president, Diageo Europe and India, commented: “We are excited by the opportunity to bring Don Papa into the Diageo portfolio to complement our existing rums. This acquisition is in line with our strategy to acquire high-growth brands with attractive margins that support premiumisation, and enables us to participate in the fast-growing super-premium plus segment.”

Carroll commented: “Diageo has a strong track record in nurturing founder-led brands. They believe in our unique story and have genuinely embraced our brand idea. We believe this acquisition is a great opportunity to take Don Papa into the next exciting chapter of its development.”

Broker Jefferies said the deal was consistent with Diageo’s existing strategy of filling gaps in its portfolio through bolt-on acquisitions such as Haig Club or Naked Turtle as well as early stage investments such as Seedlip.

“Don Papa is consistent with the strategy to scale up fast-growth premium brands with good liquids, attractive packaging, and authentic backstories,” Jefferies said.

“The strategy to acquire high growth brands with attractive margins is more favourable than major, transformational M&A. The risk reward profile is asymmetric, given the low initial capital outlay and opportunity to leverage Diageo’s strong distribution network.”

Diageo shares were up 1.9% to 3,771.5p on the news.