Guinness parent Diageo is selling 19 spirits brands, including Seagrams VO whisky and cinnamon schnapps Goldschlager, to US-based company Sazerac for $550 million as it looks to focus on premium brands.
The world’s largest distiller, which includes Johnnie Walker Scotch and Smirnoff vodka among its brands, said on Monday it would return the net proceeds of about £340 million to shareholders through a share repurchase.
Diageo said the deal will help it develop faster-growing premium drinks in its US portfolio, where it’s pushing new brands such as George Clooney’s Casamigos tequila alongside its core whiskey and vodka lines.
Sazerac, the closely held Metairie, Louisiana-based owner of Buffalo Trace bourbon, has been fleshing out its portfolio by adding brands such as Southern Comfort.
Diageo chief financial officer Kathy Mikells called the sale "just another example of what we're doing to drive efficient growth as we focus on the premium and above segment".
The marketing investment backing the portfolio of value brands was limited, she said in an interview, but the sum will be redeployed across more profitable liquors. Many mass-market drinks labels have come under pressure as drinkers in developed countries consume less alcohol but increasingly choose pricier brands.
Reduce earnings
The sale, which also includes whisky brands such as Seagram’s 83, Seagram’s Five Star, Myers’s rum, Romana Sambuca, Popov vodka and Yukon Jack whiskey will reduce Diageo’s pre-exceptional earnings per share by 1.9 pence per share in the first full financial year after closing.
Diageo said it expects the sale to bring in a one-time gain of roughly £110 million. Sky News first reported in May that the world’s largest spirits company was in talks to sell some US-focused brands for overall price tag of between $500 million and $1 billion.
The company has also agreed to long-term supply contracts with Louisiana,-based Sazerac.
Diageo shares rose as much as 0.8 per cent in London trading on Monday. – Reuters/Bloomberg
