Source: The Times
Matthew Goodman
19 August 2012
THE drinks giant behind Johnnie Walker and Guinness is close to a deal to add Jose Cuervo tequila to its portfolio.
Diageo is hoping to buy the business from Mexico's Beckmann family. The price is expected to be about $3 billion (£1.9 billion) and is likely to be paid, at least in part, in shares.
Paul Walsh, Diageo's chief executive, could announce the acquisition alongside annual results on Thursday. However, most observers expect the talks, which have been going on for more than a year, to last a few more weeks.
A successful deal would be a coup for Walsh and the most impressive in a series of acquisitions that have increased Diageo's exposure to fast-growing markets in Latin America, the Middle East and Asia. It already distributes Cuervo internationally, but would like greater control of the business. The distribution deal is due to expire next June.
Any sale is likely to be complex, possibly featuring separate agreements for the brand, the production facilities and the land where the agave plant - the key to making tequila - is grown.
The Beckmanns, one of Mexico's wealthiest families, are being advised on the deal by Barclays Capital, while Goldman Sachs and HSBC are advising Diageo.
Although the talks could yet fail, a successful outcome is now seen as far more likely. The protracted discussions have not deterred Diageo from looking at other deals.
It is also eyeing the purchase of a stake in United Spirits, controlled by Vijay Mallya, the flamboyant but beleaguered Indian tycoon, whose brands include Whyte & Mackay.
Shares in Diageo, which declined to comment, closed at £16.86½p on Friday, valuing the company at £42 billion.
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