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Diageo jiggers $1.9B chaser
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March 30, 1998: 7:14 a.m. ET
British drinks giant spins off Dewar's and Bombay to Bermuda's Bacardi
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NEW YORK (CNNfn) - Diageo Plc, the British international drinks colossus, said Monday it had agreed to sell the Dewar's Scotch whisky brand and the Bombay Gin brand to Bermuda-based Bacardi for $1.9 billion.
The sale is subject to regulatory approval by American and European authorities. It is expected to close within the next 30 days.
Under the transaction, the companies have agreed to a 15-year supply, blending and storage arrangement for scotch whisky.
In addition, Bacardi will acquire four distilleries from Diageo, which was created last year through the merger of UK drinks group Grand Metropolitan Plc and Guinness Plc.
The sale is a result of the regulatory requirements placed on Diageo after that merger. The drink maker was told to shed the two brands to help preserve competition in certain markets. Diageo has been shopping the units for the past few months.
Bacardi was founded in 1862 in Cuba and is currently run in Bermuda by descendants of Don Facundo Bacardi, who fled Fidel Castro's regime in 1960.
Diageo is expected to net a profit of $773.9 million after costs and tax. Diageo said in a statement it would use the proceeds from the sale to reduce its net indebtedness.
John McGrath, Diageo's chief executive said he didn't anticipate any stumbling blocks in the deal. "We believe that this will satisfy the requirements placed on Diego by the US and European regulatory authorities in respect of these brands."
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