Diageo signs agreement with Pernod to purchase Bushmills

07/06/05 Diageo has entered into an agreement with Pernod to purchase Bushmills, the world’s second largest Irish whiskey brand, for approximately £200 million. The acquisition of Bushmills represents an important opportunity for Diageo as Irish whiskey is a category in which, currently, Diageo does not participate.  Diageo  expects that the proposed acquisition will be economic profit positive during the fourth full year after completion using a 9% weighted average cost of capital.

In addition Pernod has granted Diageo an exclusive no cost option to purchase Allied Domecq ’s Montana wine business with the exception of the Corbans, Stoneleigh and Church Road wine brands for 11 x 2004 contribution after marketing expenditure (CAMP).  The purchase price, of approximately £ 320 million, may be adjusted to reflect information relating to the Montana CAMP which will be available following completion of the acquisition of Allied Domecq  by Pernod. Diageo will exercise the option subject to determining that the acquisition of Montana can achieve appropriate growth and returns for shareholders.

The agreements are conditional upon the successful completion of Pernod’s agreed bid for Allied Domecq  which Pernod and Allied Domecq  have both stated they expect to occur on 26 July 2005. Both acquisitions would also be subject to regulatory clearance and are expected to close in late 2005 or early in 2006. 

Under a separate agreement Diageo has undertaken to cease discussions with any third party in connection with any of the assets or businesses currently owned by Allied Domecq  and not to (and to procure that none of its concert parties will) acquire or dispose of any shares in Allied Domecq  without Pernod’s consent. This undertaking falls away on completion of the acquisition of Allied Domecq  by Pernod

Diageo’s financial position remains strong and therefore notwithstanding both of these acquisitions Diageo will recommence the share buy back programme from tomorrow.

Diageo has been a lead player in the consolidation of the global drinks industry. In December 1997 Diageo plc was formed through the merger of Guinness and Grand Met, creating with that merger  the world's leading spirits company, United Distillers and Vintners. In 2000 Diageo merged its spirits, wine and beer businesses followed in December 2001 by the acquisition of certain key businesses of the Seagram company.  Diageo now owns market leading spirits, wine and beer brands.