Diageo turns to tequila for its next buy

 
Marion Dakers
DRINKS group Diageo is considering a bid for tequila firm Jose Cuervo, people with knowledge of the company confirmed yesterday, as part of chief executive Paul Walsh’s multi-billion pound acquisition spree.

Diageo, which already distributes Cuervo on behalf of the Beckmann family that owns the brand, is said to be considering a $2bn (£1.2bn) takeover offer.

The move comes just a week after the company was linked to Polish spirits group Stock, as it attempts to broaden its reach in emerging markets to offset flagging domestic sales.

Diageo, the maker of Johnnie Walker whisky and Smirnoff vodka, last month also agreed to buy Turkish spirits firm Mey Icki for £1.3bn.

Walsh halted Diageo’s share buyback programme in 2009 to help fund the company’s war chest.

Cuervo has been tightly held by the Beckmann dynasty for six generations, but is now said to be in talks to appoint Barclays Capital to help it sell off the company. BarCap declined to comment yesterday.

Cuervo and Diageo signed a joint venture in 2003, with the former paying $100m for a 50 per cent stake in Diageo’s Don Julio tequila brand.

Drinks firms have undertaken a spate of takeovers and consolidation in recent months as companies look to shelter from faltering sales.

The spirits arms of consumer goods group Fortune Brands is expected to be put on the block later this year, while France’s Rémy Cointreau told the market last month it was in exclusive talks to sell its champagne business to EPI.

Diageo declined to comment yesterday, while Jose Cuervo’s head office was not available for comment.