Diageo buys Turkish firm in £1.3bn deal

DIAGEO, the world’s biggest spirits maker, yesterday confirmed a deal to buy the Turkish spirits group Mey Içki for £1.3bn, in its latest move to attract middle class drinkers in emerging markets.

The London-based maker of Johnnie Walker whisky and Smirnoff vodka is buying Turkey’s biggest spirits company from investment firms TPG Capital LP and Actera.

The agreement is expected to be completed in the second half of 2011.

It is the clear market leader in raki, the biggest spirits category in Turkey, and has a leading position in vodka, while it also has an extensive nationwide sales and distribution network.

It had net annual sales of £300m in 2010 and earnings before interest and tax (EBIT) of £120m, and will be earnings accretive for Diageo in the first full year of acquisition by around one per cent.

The group said the deal will allow it to accelerate the growth of its international spirits brands in Turkey through Mey Içki’s distribution network and customer relationships.

Diageo chief executive Paul Walsh said: “Turkey is an attractive, growing market for Diageo with strong GDP growth.

“The acquisition of Mey Içki transforms our existing position in this fast growing spirits market.

“This investment represents the continuation of our strategy to increase Diageo’s presence in those emerging markets, such as China and Vietnam, which have a rapidly growing middle class.”

Earlier this month Diageo said it was relying for growth on emerging markets where middle class drinkers were starting to get a taste for alcohol, particularly premium brands. Sales in Western Europe have been hit by the economic downturn, it said.

NATALIE
BLYTH

HSBC

NATALIE Blyth was the HSBC banker fronting the bank’s advisory team on the deal. Working out of London her and her team helped to nail down the details and bring a swift conclusion to the negotiations, leading to yesterday’s announcement.

A team from UBS also worked on the purchase of the Turkish business, seen as a “good fit” for Diageo in its move to grow in emerging markets.

The private equity owners of Mey Içki, TPG Capital LP and Actera made it known that the business could be put up for sale around three months ago. It is understood that the negotiations went smoothly and were concluded relatively quickly.

HSBC has advised on some major deals recently, including the sale of Gatwick for BAA.

HSBC hired Blyth from Deutsche Bank as part of a push to strengthen its UK and cross-border advisory business for its European clients in the consumer sector. She was formerly a managing director in Deutsche Bank’s global consumer group and head of its European consumer team.