Diageo pays up to $1bn for George Clooney tequila brand

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An upmarket tequila brand launched four years ago by Hollywood actor George Clooney and two of his friends has been valued at up to $1bn in an agreed offer from Diageo, the UK-based drinks group. Casamigos, which the actor founded with restaurateur Rande Gerber and real estate developer Mike Meldman as a side project, instantly enjoyed the backing of America’s rich and famous, helping propel the brand to sales of 120,000 cases in 2016, mainly in the US. The deal — Diageo’s fourth largest, according to Capital IQ — underscores the revival of tequila and mescal as trendy spirits, which is seeing companies in the sector command lofty prices. Earlier this month, France’s Pernod Ricard agreed to take a majority stake in Del Maguey Single Village Mezcal. Diageo will pay $700m for Casamigos, which loosely translates as “house of friends” and is largely controlled by its three founders, when the deal closes. An additional $300m is payable depending on the performance of Casamigos over 10 years. Tequila has until recently represented a gap in the drinks cabinet of Diageo, which sells nine labels of American and Scotch whisky but just two brands of the Mexican spirit. Casamigos will sit alongside the company’s Don Julio tequila brand, which has registered double-digit growth in the year to June 2016. Lex Diageo: su casa Justifying a $1bn valuation for his niche tequila brand will require all of George Clooney’s talents Diageo plans to keep Mr Clooney and his partners on board, and hopes to use its international reach to speed up Casamigos’ growth. Sales of super-premium tequila brands grew nearly 600 per cent in the US between 2003 and 2015, according to the Distilled Spirits Council of the United States, far outpacing other spirits. Mexico’s top tequilas have led the growth, with volumes of ultra-premium tequila rising 35 per cent in 2016 compared with 2015 to make up a third of tequila’s $7bn global sales, according to the IWSR, the London-based authority on the drinks trade. Tequila was also the spirits industry’s fastest-growing category in 2016, with volumes increasing 5.2 per cent year-on-year. That compared with a 1.3 per cent decline for the global alcoholic drinks market as a whole, the IWSR said. Over the past two years, Casamigos saw compound annual growth of 54 per cent, according to the company, and it expects to deliver more than 170,000 cases this year. Diageo said it would take four years for the deal to lift profits. “[Casamigos] supports our strategy to focus on the high growth super-premium and above segments of the category,” said Ivan Menezes, Diageo’s chief executive. “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.” Messrs Clooney and Gerber — the latter married to model Cindy Crawford — decided to start producing tequila in 2013 when they were each building villas in Mexico’s Baja California peninsula. They never intended it to be a proper business, but as they kept producing larger amounts for friends and family they were eventually forced to get a corporate licence, which became a gateway to start commercialising the brand. Special Report The Business of Tequila Connoisseurs drive growth at the expense of the headache-inducing low end “It was just for us,” Mr Gerber told CNBC in November. “We didn’t really want to be in the business. We figured, George is an actor and a director. I own restaurants and bars and wasn’t looking to get in another business.” “But then the distiller called and said, ‘Hey guys, we have a little problem: In the past two years, we’ve been sending you about a thousand bottles a year. Either you’re selling it or you’re drinking way too much — either way, we can’t keep calling it samples. You guys have to get licensed and do this right.’” The brand picked up popularity very rapidly on the back of Mr Clooney’s stardom, making it one of the fastest growing ultra-premium brands in America. Diageo was advised by Centerview Partners and Sullivan & Cromwell. Casamigos was advised by Wilson Elser. Additional reporting by Jude Webber in Mexico City

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