The deal assumes significance since it marks Sazerac’s new market focus on premium brands and also because it continues to maintain consistence across Diageo’s spirits, as the two have entered into a long-term supply contracts agreement.
U.S. based Sazerac is to acquire 19 spirit brands, including cinnamon schnapps Goldschlager, Seagrams VO whisky from Diageo Plc for $550 million as it increases its market focus on premium brands.
In May 2018, Sky News had reported that the world’s largest spirits company was in talks to sell some US-focused brands for an overall price tag of between $500 million and $1 billion.
On Monday, Diageo, the British maker of Johnnie Walker Scotch and Smirnoff vodka, stated it would return the net proceeds of about $438 million (340 million pounds) to shareholders through a share repurchase.
Incidentally, the sale also includes whisky brands such as Seagram’s Five Star, Seagram’s 83 and Myers’s rum. In the first full financial year following the closure of the deal, Diageo’s pre-exceptional earnings per share is set to reduce by 1.9 pence per share in the first full financial year.
Diageo said it expects the sale to bring in a one-time gain of roughly 110 million pounds. It has also agreed to long-term supply contracts with Louisiana, U.S.-based Sazerac.