The Australian winemaker says the acquisition will enable it to ‘transform’ its US business, particularly in the high growth US luxury and ‘masstige’ (mass prestige) segments.
Meanwhile, Treasury Wine Estates will also acquire Blossom Hill in the UK, which is the second largest wine brand (by volume and value) in this market.
Diageo says that wine is ‘no longer core’ to its business, and the sale will allow it to focus on its core portfolio.
The sale covers Diageo’s Percy Fox business (UK) and Chateau and Estate Wines (US).
Aussie wine ambitions
Treasury Wine Estates sells around 30m cases of wine annually, with revenues of around $1.7bn AUD ($1.2bn USD). Its portfolio already includes Penfolds, Stags’ Leap and Etude.
In the US, it will acquire Sterling Vineyards, Acacia, Provenance and Hewitt, and Beaulieu Vineyards among others from Diageo.
Michael Clarke, CEO, Treasury Wine Estates, said the acquisition will be a ‘game-changer’ for its US portfolio, with the opportunity to step up growth in the US, Canada, Asia and Latin America.
Diageo has released £1bn from the sale of non-core assets over the course of this financial year so far. Ivan Menezes, CEO, Diageo, said the sale of the wine operations will allow it to focus on its core business (Diageo’s other categories are spirits and beer: with its portfolios including Johnnie Walker, Smirnoff, Baileys, Bell’s and Guinness).
Diageo will use the proceeds of the wine sale to repay borrowings.
While the sale to Treasury Wine Estates will cover most of its major wine interests, Diageo will retain Justerini & Brooks Wine Merchants (UK), wine business Navarro Correas (Argentina), wine brands Mey Icki (Turkey) and USL (India), the Chalone brand and assets (US), and the Acacia winery and vineyard (US).
The acquisition is expected to complete in three months, subject to regulatory approvals.