Deutsche Bank predicts major Campari merger

The German bank has issued a note predicting that Campari could merge with or takeover another drinks business to gain footing in the US. According to the bank there are only three companies worth considering. 

Bob Kunze-Concewitz, the chief executive of Davide Campari Milano, has made little secret of his ambition to further expand the company into the vital American market.

Observers had surmised that this could mean a deeper move into brown spirits by targeting a Bourbon producer to support its existing Wild Turkey brand but in a new analysis Deutsche Bank discounts that theory, suggesting that only three rivals should interest him.

The bank suggests Kunze-Concewitz’s best move would be to seek to takeover or merge with one of Edrington Group, Rémy Cointreau or William Grant.

It believes all three might be willing to consider an alliance which would have mutual benefits with Campari in terms of increased portfolio clout and market penetration.

Edrington is the producer of predominantly whisky brands, notably The Famous Grouse. It is controlled by the Robertson Trust set up by the granddaughters of founder William Roberston.

William Grant, also family-owned, is the distiller noted for Glenfiddich whisky and Henrick’s gin.

Rémy Cointreau, is the listed French liquor group with core brands including Rémy Martin Cognac, Cointreau orange liqueur and Mount Gay rum. Its market capitalisation of €7.5 billion is little more than half that of Campari or William Grant.

A deal with Rémy Cointreau would give Kunze-Concewitz the Rémy Martin brand which is by far the leader in China’s market for Cognac.

Deutsche Bank reckons Campari has available €30 billion in “equity-funded firepower” and that an “equity-funded acquisition could accelerate earnings per share by up to 30%”.

“We believe Campari’s current share price fails to reflect the company’s sector-leading growth or the opportunity to create value with M&A,” it said.

Deutsche Bank rates the group a ‘buy’ and targets a €13.70 share price against today’s €11.6.

Davide Milano Campari, the holding company for the Italian drinks group, moved its share listing to Amsterdam in 2021, a change that gave its owners greater financial flexibility at the same time as making the company virtually immune from hostile takeover under Dutch financial laws.

Earlier this month Campari further paved the way for expansion by granting extra voting rights to shareholders with five years’ of uninterrupted holdings.

Effectively that means the Garavoglia family now holds 84% of the votes through their Luxembourg vehicle Lagfin.

At the time Kunze-Concewitz told Reuters the change of voting structure gave the Garavoglias more flexibility to make a larger merger or acquisition.

In the past 10 years Campari has completed a string of more than 40 acquisitions costing a total of about €4 billion.

Its sales have increased annually by about 10% over that period, a rate that has accelerated slightly since global pandemic restrictions were eased.

Like for like revenues in the first half of this year rose by 14%.