Talk over Diageo deal for Jose Cuervo ramps up

Reports are circulating that Diageo has entered into talks to acquire Tequila brand Jose Cuervo for more than US$2 billion.

According to “three people with knowledge of the matter”, Bloomberg reports that Cuervo is in exclusive discussions with Diageo, though the owning Beckmann family has not yet committed to selling and is merely weighing up its options.

Diageo has first option to buy the brand should it be made available due to the fact it already holds its international distribution rights.

That deal is set to expire in 2013, however, adding an element of urgency to the talks from Diageo’s perspective.

Although Juan Beckmann Vidal, chairman of Casa Cuervo, said earlier this month that the company was merely renegotiating its distribution deal with Diageo and was not considering selling the brand, insiders say Cuervo has asked bankers at Barclays Capital to explore options and negotiate a potential sale.

Diageo, Jose Cuervo and Barclays Capital have all so far failed to respond to requests to confirm the nature of the talks.

Other potential Tequila brand targets for Diageo include Fortune Brands’ Sauza, though it is no secret it would prefer Cuervo – the world’s biggest-selling Tequila brand.

Diageo has repeatedly stated its desire to expand in emerging markets over the course of the past year and backed this up with the US$2.1bn purchase of Mey Icki, Turkey’s leading spirits manufacturer, in February.

Alan Lodge, 25.05.2011