Bushmills sold to Jose Cuervo

Diageo is selling Bushmills Irish Whiskey to Jose Cuervo Overseas.

The transaction will result in a net payment of $408 million to Diageo upon completion of the confidential deal which is expected to go through in early 2015 subject to certain approvals.

As part of the deal, Diageo has agreed with Casa Cuervo the acquisition of full global ownership and control of Tequila Don Julio and the early termination of Casa Curevo’s production and distribution agreement for Smirnoff in Mexico.

According to a statement just released from Diageo, “The transaction is expected to be economic profit break-even in year three assuming a WACC rate of 9%. Assuming completion of the transaction in early calendar 2015 and the use of the net proceeds to reduce debt at Diageo’s average rate of interest, the transaction will dilute eps by 0.6% in the year ending 30 June 2015”.

Diageo Chief ExecutiveIvan Menezes commented, “This transaction delivers two key objectives for us. We’ve secured our position in the growing super and ultra-premium segments of the Tequila category and further strengthened our global footprint by expanding our leading position in Mexico where the growth of spirits has great potential.

“Diageo has realised this opportunity through the breadth and depth of our portfolio. It delivers our strategy: to build our presence in the world’s fastest-growing markets and lead the industry in the biggest growth opportunities.”

Colin O’Brien, Operations Director at Diageo, added, “Bushmills Irish Whiskey is a brand built on great history, heritage and passionate people and has been a cherished part of the Diageo family for more than nine years.  During this time we have invested over £80 million to build capacity, infrastructure and maturing inventory at the Distillery, which has supported the continued growth of the brand.

“We’re immensely proud of these achievements and while we recognise that today’s announcement does represent a change for Bushmills we’re confident that Jose Cuervo – a company with a proven commitment to its people and to valuing the history and heritage of its brands – will continue to nurture Bushmills in the future.”

Details of the component parts of this transaction remain confidential but Smirnoff volume and net sales in Mexico in the year ended 30th June 2014 were 285,000 cases and £9 million respectively.

Bushmills volume and net sales in the same period were 800,000 cases and £57 million.

Tequila Don Julio had volume and net sales of 590,000 cases and £105 million, of which Diageo accounted for 345,000 cases and £75 million net sales, in the year ended 30 June 2014.

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