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LONDON-Diageo PLC is selling a portfolio of 19 brands, including Seagram's VO whiskey and cinnamon schnapps Goldschläger, to Sazerac Co. for $ 550 million as it pivots to premium brands and higher-growth products.
The world's largest liquor maker, which owns Johnnie Walker's whiskey and Tanqueray gin, said Monday it would return net proceeds of about £ 340 million ($ 441 million) to investors through share buybacks.
Diageo hired bankers earlier this year, which also includes Myers' rum, Popov vodka and Romana Sambuca. At that time, people were experiencing $ 1 billion.
Kathryn Mikells, Diageo's finance chief, said the deal would allow the company's U.S. spirits business to focus on premium brands. The brands sold Monday were mostly at the end of the market, which has declined, she added.
"People are not drinking more, they are drinking better," she said.
The deal is U.K.-quoted Diageo's latest move to better-growing assets and more pricier, international brands that are in higher demand.
Last year, Diageo bought Casamigos, an upscale tequila brand co-founded by actor George Clooney that increased its exposure to the fast-growing tequila market. It has also tried to get to grips with high-end variants of its existing brands.
At the same time, Scottish golf resort Gleneagles Hotel Ltd. to an investment company and most of its wine portfolio at Treasury Wine Estates Ltd.
Analysts at Jefferies said Monday's deal was "decisive move to accelerate growth in the U.S." that would allow Diageo to focus more on-both in terms of marketing spend and management time-on bigger opportunities. However, they also flagged the risk that the brands could be damaged by wholesalers and retailers.
For Sazerac, the deal is the New Orleans-based company's latest move to bolster its portfolio. The United Kingdom is one of the most widely held distilleries in the world, including Brown-Forman Corp.'s Southern Comfort and Pernod Ricard SA's Danish vodka brand FRIS.
Diageo said it expects the deal to complete early next year, to generate a £ 110 million one-time gain and reduce pre-exceptional earnings by 1.9 pence a share.
Sazerac is a company with long-term supply contracts.
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