Campari Buys Jamaican Rum Maker

Source: WSJ

By MANUELA MESCO

Sep 3rd

Gruppo Campari SpA, CPR.MI +0.76% maker of the iconic red Italian spirit, Monday became the latest European drinks maker to snap up a local producer in the Americas with the acquisition of Jamaican rum maker Lascelles deMercado & Co.

The Italian company has acquired 81.4% of Lascelles, whose brands include Appleton Estate, Wray & Nephew and Coruba, from Trinidad and Tobago-based conglomerate CL Financial, and plans to buy the rest by the end of the year. The entire deal will cost $414.8 million and should lead to a profit from next year, Campari Chief Executive Bob Kunze-Concewitz told a news conference.

Mr. Kunze-Concewitz said the move will mean the Americas contributes 40.4% of the company's global revenue.

Lascelles marks Campari's third-biggest acquisition, after its 2009 buy of Wild Turkey from French rival Pernod Ricard SA and that of Skyy Spirits in 2001-and its first rum brand-and the latest in a string of deals over recent years.

In 2011, the company bought Brazil's Sagatiba, which produces the country's best selling spirit cachaça, and in 2008 Argentina-based distributor Sabia SA, of which Campari now owns 100%. Mr. Kunze-Concewitz said that although there is still financial capacity for more acquisitions, the company will more likely spend the next few months to "digest" the latest operation.

The string of acquisitions shows how global beverage companies are competing more fiercely than ever for a leading position in the Americas, a crucial growth region, partly in reaction to the torrid conditions they face in Western Europe where recession and government austerity measures are forcing drinkers to spend less.

The U.K.'s Diageo DGE.LN -0.29% PLC, owner of Guinness stout and Johnnie Walker whiskey, last month said it remains in close talks with Mexico's Beckmann family over a reported $3 billion deal for tequila giant Jose Cuervo. And in May, the company bought Ypioca, one of Brazil's biggest producers of cachaça, for £300 million ($476 million). Diageo expects developing economies to contribute half of its global revenue by 2015, up from almost 40%.

Brewers are also being drawn to the region. Anheuser-Busch InBev NV ABI.BT +0.19% has so far this year acquired the 50% stake in Mexico's Grupo Modelo SAB de CV that it didn't already own for $20.1 billion, and gained control of Dominican brewer Cervecería Nacional Dominicana SA for over $1 billion.

"It's important to have local brands in emerging markets, as these are brands that already have their own distribution lines, which companies can use to expand the market for their own brands. As for Campari's acquisition, this is significant as it marks the company's access to the rum market. Campari continues to expand its portfolio without overburden its financials," said Giulio Lombardi, senior analyst at Fitch Ratings. He also calculated that Lascelle's market share in the U.S. accounts for roughly less than 10%.

Mr. Kunze-Concewitz said spirits will account for more than 80% of Campari's annual revenue following the deal.

The price is at a historic multiple of 15 times the company's earnings before interest, tax, depreciation and amortization for the 12 months to June 2012.