Brown-Forman buys Herradura in US$876 million deal – 29/08/06

US. Brown-Forman Corporation has reached agreement with Pablo Romo de la Peña and Jose Guillermo Romo de la Peña, owners of Grupo Industrial Herradura, (Casa Herradura), to purchase substantially all of their 136-year-old company’s related assets for $876 million dollars.

Under terms of the agreement, Brown-Forman will acquire Herradura and El Jimador tequilas and the New Mix tequila-based ready-to-drink brand. Other important assets included in the purchase are tequila production facilities and a sales and distribution organization in Mexico, which operates across all major channels of business. Casa Herradura, with approximately 1,100 employees, reported net sales during calendar year 2005 of approximately US$200 million, while generating operating margins comparable to Brown-Forman’s.

Approximately 380,000 nine-litre cases of the super-premium Tequila Herradura were sold worldwide in calendar year 2005, of which about 70,000 were in the US. Nearly 1.4 million nine-litre cases of the premium El Jimador tequila were sold worldwide last year, of which 150,000 were in the US, where the brand has experienced strong double-digit growth over the last four years.

“In Herradura and El Jimador, we are acquiring two strong brands competing at the super-premium and premium levels in the world’s largest tequila markets – the US and Mexico,” said Brown-Forman Chief Executive Officer Paul C. Varga. “While Brown-Forman has had a variety of interests in Mexico for many years, the acquisition of Casa Herradura is our most significant investment in the country and will enable us to continue our company’s international expansion.

“These brands will also help us advance our business within the growing Hispanic population of the US and increase our participation in the exciting US cocktail culture, as the tequila-based margarita is the most called-for drink in this country.”

The transaction has been approved by the board of directors of Brown-Forman and the shareholders of Casa Herradura, but is subject to customary closing conditions, including US and foreign antitrust approvals. The deal is expected to close before 31 December of this year, and provides for a post-closing price adjustment based on the actual working capital at closing.

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