Diageo Looks to High End -- WSJ
13 Novembre 2018 - 9:02AM
Dow Jones News
By Daphne Zhang
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 13, 2018).
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 toward premium brands
and higher-growth products.
The world's largest liquor maker, which owns Johnnie Walker
whiskey and Tanqueray gin, said Monday it would return net proceeds
of about GBP340 million ($441 million) to investors through share
buybacks.
Diageo hired bankers earlier this year to sell the portfolio,
which also includes Myers's rum, Popov vodka and Romana Sambuca. At
that time, people familiar with the matter said the brands could
generate proceeds of up to $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 lower end of the
market, which has seen a decline, she added.
"People are not drinking more, they are drinking better," she
said.
The deal is U.K.-listed Diageo's latest move to shed
lower-growth assets and focus more on 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 drinkers
to trade up to high-end variants of its existing brands.
At the same time, it has sold Scottish golf resort Gleneagles
Hotel Ltd. to an investment company and most of its wine portfolio
to Treasury Wine Estates Ltd.
Analysts at Jefferies said Monday's deal was a "decisive move to
accelerate growth in the U.S." that would allow Diageo to focus
more -- both in terms of marketing spend and management time -- on
bigger opportunities. However, they also flagged the risk that the
brands could be revitalized under new ownership and that the sale
could hurt relationships with wholesalers and retailers.
For Sazerac, the deal is the New Orleans-based company's latest
move to bolster its portfolio. The closely held distiller, with
operations in several U.S. states and overseas, has snapped up
several brands in recent years, including Brown-Forman Corp.'s
Southern Comfort and Pernod Ricard SA's Danish vodka brand
FRÏS.
Diageo said it expects the deal to complete early next year, to
generate a GBP110 million one-time gain and reduce pre-exceptional
earnings by 1.9 pence a share.
The company has agreed to long-term supply contracts with
Sazerac for five of the brands for 10 years.
(END) Dow Jones Newswires
November 13, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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