Once Again, Diageo Hopes Stars Will Align for its Latest Full Price Acquisition
Once again, Diageo is paying a full price for an acquisition target. The company's purchase of the tequila brand Casamigos for $700 million with the potential for an additional $300 million in long-term performance-based consideration, is neutral to our valuation of Diageo at the low end of that range, and modestly dilutive at the high end. We are maintaining our GBX 2,250 fair value estimate because the deal is relatively small for Diageo (less than 3% of North American sales). We still believe...Diageo is a premium drinks business based in the United Kingdom. Co. is engaged in producing and distributing spirits, beer and wine. Co.'s operations include producing, distilling, brewing, bottling, packaging, distributing, developing and marketing of a range of brands. The brands that it produces and distributes include Smirnoff vodka, Johnnie Walker scotch whisky, Baileys Original Irish Cream liqueur, Captain Morgan rum, J&B scotch whisky, Tanqueray gin and Guinness stout. In addition, Co. also has the distribution rights for the Jose Cuervo tequila brands in North America and other countries.
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