Diageo buys 50% stake in Ketel One

In a deal worth almost one billion US dollars, Diageo has agreed to buy 50% of Ketel One vodka. The acquisition not only highlights the lofty price of premium vodka brands, but also removes Diageo from the bidding frenzy for Vin & Sprit’s Absolut.

Diageo announced yesterday that it is to pay US$900m for a 50% equity interest in Ketel One, owned by the Nolet family in The Netherlands. The deal will give Diageo permanent exclusive global rights to market and distribute the vodka, but the Nolet family ownership of the brand rights.
Profits will be shared equally.
Currently Ketel One sells almost 2 million cases, mostly in the US. It is hoped the new agreement will accelerate the growth of the brand in markets outside North America.
The transaction is expected to close by 31 March 2008, subject to regulatory approvals.
Importantly, Diageo also have right of first refusal should the Nolet family decide to sell the brand rights. Alternatively, Diageo can choose not to buy the Nolet family stake in exchange for a US$100m payment.
The price, at almost US$1 billion for the half stake in Ketel One, values the vodka brand at a similar amount to Grey Goose when Bacardi bought it from Sydney Frank in early 2005 for US$2.3 billion.
Moreover, the deal ends speculation as to Diageo’s ability to add Absolut to its vodka portfolio, which already includes Smirnoff and Ciroc. Paul Walsh, chief executive, Diageo, told CNBC television in an interview this morning, "We have now said that we are not in the market for that brand [Absolut]. We are delighted with the rights we have secured as part of this [Ketel One] deal. We believe that Ketel One has got far better growth prospects."

Patrick Schmitt, 06/02/08