Wed, Jan 24, 2018 - Page 10 News List

Bacardi to pay US$5.1bn for tequila maker Patron

Bloomberg

Bottles of Patron tequila and Bacardi rum are pictured in Chicago on Monday.
Warning: Excessive consumption of alcohol can damage your health

Photo: AFP

Bacardi Ltd is tapping into the fast-growing market for tequila by acquiring Patron Spirits International AG in a deal valuing the company at US$5.1 billion.

The purchase is to combine two of the world’s largest closely held distillers, putting Grey Goose vodka, Dewar’s scotch and Bacardi rum under the same banner as Patron’s famous tequilas.

The merger is to give incoming CEO Mahesh Madhavan a prestigious brand as he works to expand Bacardi’s global footprint.

The executive, who is poised to take the reins on April 1, plans to boost sales by getting overseas consumers to trade up from local spirits.

Bermuda-based Bacardi, which already sells Cazadores tequila, accounted for 5.8 percent of the total alcoholic beverage market last year, research firm IRI’s data showed.

“Adding Patron to the Bacardi portfolio creates a tremendous opportunity for the brand outside of the United States, as Bacardi’s international distribution network will help grow Patron around the world, increasing scale in the US and globally,” Madhavan said in a statement.

Bacardi is to tap debt markets to help finance the deal, according to a person familiar with the deal.

Bacardi acquired an initial 30 percent stake in Patron for less than US$500 million in 2008, said the person, who asked not to be named because the details are private.

Agave-based beverages, which include tequila and mezcal, have seen sales accelerate over the past decade.

Super-premium tequila grew eightfold between 2002 and 2016, the Distilled Spirits Council trade group said.

That is attractive compared with other spirits segments, such as rum and vodka: rum volumes declined by 0.2 percent in the same period, and vodka gained 2.4 percent.

The combined company could be the top spirits maker in the super-premium segment in the US, IWSR data showed.

Patron, an early pioneer in the market for upscale tequila, was founded by John Paul DeJoria and Martin Crowley in 1989.

DeJoria — who was once homeless, according to a biography on Patron’s Web site — initially found success in hair care company John Paul Mitchell Systems before helping to start Patron, where he now serves as chairman.

The company succeeded in marketing the spirit to a more sophisticated clientele and broadening its market base.

The deal with Bacardi helps cement tequila’s status as a key product in the global market for spirits.

As sales in the category surged, Diageo PLC last year paid US$1 billion to acquire George Clooney’s start-up Casamigos.

Pernod Ricard SA also boosted its tequila portfolio by acquiring the Del Maguey brand in June last year.

Becle SAB, the producer of Jose Cuervo tequila, rode the wave by raising US$790 million in an initial public offering a year ago.

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