Diageo buys George Clooney tequila Casamigos for $1bn

Diageo has entered into a definitive agreement to acquire Casamigos, a US super-premium tequila brand founded by Hollywood star George Clooney, for $1bn.

Diageo says this is an exciting opportunity for it to strengthen its involvement in the fast growing tequila category, as well as expand the brand internationally.

Diageo chief executive Ivan Menezes, said: “We are delighted to announce this transaction today to extend our participation in the tequila category. 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.”

The transaction values Casamigos at up to $1bn, with initial consideration set at $700m and a further potential $300m based on a performance linked earn-out over 10 years, reflecting the brand’s growth trajectory and potential, says Diageo.

Casamigos was created in 2013 by founders George Clooney, Rande Gerber and Mike Meldman. The essence of the brand, “made by friends for friends”, is reflected in the name, Casamigos or ‘house of friends’.

Casamigos is said to have an authentic brand identity with a smooth and accessible taste profile. The brand’s quality and uniqueness has delivered impressive growth, reaching 120,000 cases in 2016, primarily in the US, and a CAGR of 54% in the last two years.

The brand is on track to reach more than 170k cases by the end of 2017.

The world’s largest premium spirits company says the founders will continue their involvement in the future of Casamigos. This, combined with the Diageo’s strengths, will ensure the continued momentum of the brand in the US as well as realising the growth opportunity from international expansion, it states.

The transaction is expected to close in the second half of 2017, subject to regulatory clearances. Diageo expects the transaction will be EPS neutral (earnings per share) for the first three years and accretive thereafter. “We expect the acquisition will be economic profit positive in the fourth full fiscal year post-completion”, says the company’s statement.

The acquisition will be funded through existing cash resources and debt.

Casamigos Tequila co-founder, Rande Gerber, said: “We are extremely excited to team up with one of the largest, most respected spirits companies in the world.

“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."

Euromonitor International’s senior alcoholic drinks analyst, Jeremy Cunnington, told Drinks International: “Key element is the continued healthy growth of tequila, especially in the US, driven by high end tequilas such as Casamigos.

“The company obviously feels that the growth trajectory of the brand, especially with its added distribution heft will produce results. However, considering they already have a raft of high end tequilas, such as Don Julio, Peligrosso and De Leon it does seem rather surprising.

“However, it is worth noting that this acquisition is part of a general trend of companies willing to pay very high multiples for spirits brands of perceived quality e.g Pernod Ricard and Smooth Ambler and Constellation’s recent spirits acquisitions. It is very much a sellers’ market and a number of buyers will be burnt with their optimism for the brands’ performance not matching reality,” said Cunnington.