INTERNATIONAL. Diageo has paid US$900 million for a 50% stake in a new company that will own the exclusive global rights to sell, market and distribute the super-premium Ketel One vodka. The new alliance is with the Nolet family, owners of the Ketel One brand, and will be based in the Netherlands.
Diageo will consolidate the financial results of the new company, accounting for the Nolet holding as a minority interest. Profits from the sales, marketing and distribution operations will be shared broadly equally.
The Nolet family will continue to own the brand rights for Ketel One and Diageo will become the exclusive distributor of the brand globally.
Ownership of the Nolet distillery in Schiedam in Holland, where they have been distilling since 1691 and where Ketel One vodka is manufactured will remain with the Nolet family. The distillery will supply Ketel One vodka exclusively and perpetually to the new company at an agreed rate of return.
Currently, Ketel One vodka has an annual volume of 1.9 million cases. It is primarily a North American brand in the super-premium vodka segment and will complement Diageo’s premium Smirnoff and its ultra-premium Cîroc brands. Outside the US Ketel One will expand Diageo’s brand range in vodka. The Nolet family and Diageo believe that this new relationship will accelerate the growth of the brand in the US and elsewhere in the world.
The transaction is expected to close by 31 March 2008, subject to the required regulatory approvals and other conditions. Diageo expects that the transaction will be EPS neutral in the first full financial year after closing and will be economic profit-positive in year five using a weighted average cost of capital of 9%.
Both the Nolet family and Diageo consider this alliance to be perpetual. However, should either party ever decide to sell its stake in the company, the other party will have the right to purchase it at a price to be agreed. The Nolet family has an additional right to put its stake in the company to Diageo in the 4th or 5th year after closing for US$900 million plus interest. If Diageo buys the Nolet family stake, full ownership of the brand will transfer to Diageo. Diageo can choose not to buy in exchange for a US$100 million payment. The family may then pursue a sale to a third party.
Diageo Chief Executive Paul Walsh said: “This transaction is strategically important for Diageo, giving us an interest in an outstanding high quality brand and fantastic potential for global growth in the super-premium vodka segment. The new company represents a unique alliance in our industry.
“Diageo brings superior marketing and distribution expertise, together with a track record of outstanding brand stewardship and the Nolet family brings a truly great brand, based on a high quality distillation operation and invaluable knowledge and heritage gained from over 300 years of tradition.
“We feel particularly honoured that the family have chosen Diageo as their partner in taking Ketel One vodka forward to the next stage of its development. We look forward to working with the Nolet family and their team.’
Commenting on the transaction, Carel Nolet Sr said: “We are proud to be partners with Diageo, the world’s leading premium drinks company, and look forward to working together with this team of highly talented people.
“The partnership between Nolet and Diageo will combine our brand building and entrepreneurial skills with the unrivalled brand management, marketing and distribution expertise of Diageo to fully develop the potential of Ketel One vodka in the US and globally.”
UBS Investment Bank acted as financial adviser and Sullivan & Cromwell LLP and Morgan Lewis & Bockius LLP acted as legal advisers to Diageo in the transaction.
[comments]
Your post will appear – once approved – in
The Moodie Forum on our home page
MORE STORIES ON DIAGEO
Spirit of partnership flourishes as Diageo and World Duty Free partner in T5 cocktail bar – 29/01/08
Alpha and Diageo bring goodwill to Colombo as industry remembers tsunami victims – 26/12/07
Diageo strengthens Smirnoff’s travel retail presence – 29/10/07
Diageo jumps aboard The Smile Train as support for Hong Kong charity dinner surges – 06/08/07
