Diageo Leading Premium Cachaça Brand in Brazil

The consideration is BRL 900 million (approximately £300 million) in cash and the transaction is expected to complete in a month. The acquisition is expected to be EPS neutral in year 1 and Economic Profit positive in year 5 using a 12% WACC rate.

28 May 2012 --- Diageo, the world's leading premium drinks business, has reached agreement with Ypióca Agroindustrial Limitada to acquire the leading premium cachaça brand, Ypióca, and certain production assets.

The consideration is BRL 900 million (approximately £300 million) in cash and the transaction is expected to complete in a month. The acquisition is expected to be EPS neutral in year 1 and Economic Profit positive in year 5 using a 12% WACC rate. It expands Diageo’s presence in Brazil and enhances access to the growing number of middle class consumers who are driving the growth of premium brands.

The acquired Ypióca brand has net sales of BRL 177 million (approximately £60 million) based on the pro forma adjusted figures as of December 2011.

Cachaça is the largest spirits category in Brazil and Ypióca is the leader in the growing premium cachaça segment. It is the number 2 by value and the number 3 by volume in the overall cachaça category. In addition, Ypióca has an extensive sales and distribution network in the Northeast of Brazil and the second largest retail penetration nationwide.

Paul Walsh, CEO of Diageo commented:

”Brazil is an attractive, fast growing market for Diageo with favourable demographics and increasing disposable incomes. The acquisition of Ypióca gives us the leading premium brand in the largest local spirits category. It will also provide Diageo with an enhanced platform from which to accelerate the long term growth of our premium international spirits brands in Brazil.

”The acquisition meets our return criteria and will be accretive to Diageo’s top line growth.

”This investment represents the continuation of our strategy to increase Diageo’s presence in the fastest growing economies of the world.”