GOLDMAN Sachs is working closely with Diageo as the spirits company hones in on its deal to buy equity in $3bn-plus (£1.9bn) tequila brand Jose Cuervo.
Along with UBS and Credit Suisse, Goldman is expected to lead Diageo to a deal with Jose Cuervo by the early summer, possibly as soon as next month.
The tequila company, which has a 19 per cent share of the global market, is currently owned by the Beckmann family.
Diageo distributes the drink in the US, but chief executive Paul Walsh has made it clear that he will not renew this agreement when it expires in June 2013. He told the Wall Street Journal last week, “It is a brand that is not fully paying its rent in our distribution system.”
Walsh, who has been Diageo boss since 2000, is vying for a majority stake in Cuervo. “I wouldn’t take anything less than control, or a route to control,” he said.
But analysts think it unlikely that the Beckmanns will relinquish hold on their family-owned business, predicting that Diageo is more likely to get a minority stake at first with potential to build on it in the future.
Cuervo fits Diageo’s plan to buy locally popular spirits to boost sales from emerging markets. In August the spirits giant bought Turkish anise-flavoured Mey Icki for £1.3bn.
Walsh is also said to have his eye on Moet Hennessy champagne, 34 per cent owned by Diageo, or one of the brands in Beam’s portfolio, which includes Jim Beam and Knob Creek.
Diageo already owns Smirnoff vodka and Captain Morgan’s spiced rum.
ADVISERS GOLDMAN SACHS
DIAGEO is keeping its lips zipped over which advisers at Goldman Sachs are heading the drinks company’s bid to buy a stake in Jose Cuervo. The Mexican tequila brand is owned by the Beckmanns, a family expected by analysts to keep its company clutched tight – so Diageo will be making sure it doesn’t put a foot wrong.
But the beverages group has been in cohorts with Goldman for some time.
In 2005, just days after a successful pitch for the spirits giant, Goldman Sachs felt the need to resign as corporate broker to Diageo over a conflict of interest with another client, rival drinks group Allied Domecq.
The two were reconciled, but last year Matthew Westerman was forced to fight to keep Diageo on the bank’s roster when the drinks firm appointed a new broker – and it looks like his efforts will pay off.
Westerman, who was until recently global head of equity capital markets and worked on the Prada IPO, today begins his new job as co-head of Goldman’s investment banking division for Asia outside of Japan – based in Hong Kong.
But Diageo’s relationship with Goldman Sachs still has air in its lungs.
Philip Shelley joined Goldman just over 18 months ago as a managing director. He was previously co-head of corporate broking at UBS – when the bank acted as broker to Diageo.
He joined Phil Raper, Goldman’s head of equity capital markets and corporate broking.
Barclays Capital is said to be advising the Beckmann family, which owns Cuervo.