British alcoholic beverages giant Diageo plc (LSE: DGE; NYSE: DGO) said it agreed to acquire privately-held super-premium tequila brand Casamigos for up to $1 billion, with an initial payment of $700 million, and a further potential $300 million performance-based earn-out over 10 years.
Casamigos was co-founded in 2013 by supermodel Cindy Crawford’s husband Rande Gerber, together with Hollywood star George Clooney and real-estate tycoon Mike Meldman.
London-based Diageo is said to have been the world’s largest distiller until being overtaken by China’s Kweichow Moutai in April 2017.
“We are extremely excited to team up with one of the largest, most respected spirits companies in the world,” said Casamigos Tequila Co-founder, Rande Gerber. “What started from a friendship and an idea to create the best tasting, smoothest tequila as our own house tequila to drink and share with friends, has quickly turned into the fastest growing super-premium tequila.”
“We are delighted to announce this transaction today to extend our participation in the tequila category,” said Ivan Menezes, Chief Executive of Diageo. “It supports our strategy to focus on the high growth super-premium and above segments of the category. With the global strength of Diageo we expect to expand the reach of Casamigos to markets beyond the US to capitalise on the significant international potential of the brand. We look forward to building on the remarkable success of Casamigos to date.”
“We believe Casamigos will play a complementary role alongside Tequila Don Julio,” added Deirdre Mahlan, President Diageo North America. “We look forward to partnering with Rande, George and Mike to realise the full potential of the brand.”
To date, the founders have built a brand that has thrived under their organic approach in reaching and expanding their “house of friends”, and they will continue to promote the brand and provide their leadership and vision. We are delighted that the founders will have continued involvement and active participation in the future success of Casamigos. This, combined with the strengths of Diageo, will ensure the continued momentum of the brand in the US as well as realising the growth opportunity from international expansion.
Casamigos is said to have reached 120k cases in 2016, primarily in the US, with a CAGR of 54% in the last two years, and is on track to reach over 170k cases by the end of 2017.
Diageo said it expects the deal to be “EPS neutral” for the first three years and accretive thereafter, adding that the acquisition will be “economic profit positive” in the fourth full fiscal year post-completion. The buyout will be funded through existing cash resources and debt.
Diageo, founded in 1997, is a global leader in beverage alcohol with an outstanding portfolio of brands including Smirnoff (the world’s best-selling vodka), Johnnie Walker (the world’s best-selling blended Scotch whisky), Baileys (the world’s best-selling liqueur), and Guinness (the world’s best-selling stout).
Other Diageo brands include Crown Royal, JεB, Buchanan’s and Windsor whiskies, Cîroc and Ketel One vodkas, Captain Morgan, Don Julio, and Tanqueray. The company produces its brands at more than 200 sites in over 30 countries. It sells its products in over 180 countries and has offices in around 80 countries. It also owns 34% of Moët Hennessy, which owns brands including Moët & Chandon, Veuve Clicquot and Hennessy.
Photo: Rande Gerber, Cindy Crawford and George Clooney.