Diageo’s Asset Sales a Good Move, but With Shares Fairly Valued, Buyback Will Not Create Value
Diageo is to sell 19 mostly peripheral brands to Sazerac, the maker of Southern Comfort whiskey for $550 million in cash, and it will use the proceeds to increase its share repurchase program. We regard this as a positive move, and a big step toward optimizing the current portfolio. The sale is likely to be modestly dilutive to EPS this year, but will accelerate growth in the U.S. this year and next. Longer term, we believe Diageo's wide moat--its powerful distribution and pricing power--will he...
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