Diageo to mull over Ketel One option

As speculation continues over Diageo’s possible takeover of José Cuervo Tequila, the world’s biggest drinks group must also consider whether it is to take up the option of buying a 50% stake in Dutch vodka Ketel One from its partner, the Nolet family.

The two sides agreed a distribution deal in 2008, and Diageo paid around £600 million for its share of the joint venture.

The option period over the Nolet’s 50% stake runs from 9 June this year through to 9 June 2013.

It follows last month’s announcement of a restructure of the company and a greater focus on emerging markets. To this end, the company this week moved to buy SABMiller’s 20% stake in Kenya Breweries to take full ownership of the business.

Analysts at ING said of the Ketel One option: “Diageo is allowed to neglect the offer but in this case it has to pay US$100m to the Nolet family, while the family is then allowed to sell the stake to a third party (still with the right of refusal by Diageo).

“This major payment might need to be done at a time when Diageo is really actively changing its business structure. It likes to invest more in developing markets, in which we have seen four actions up to now.

“It acquired a minority stake in a Vietnamese local producer, it intends to buy the majority in a Chinese local spirits producer, it bought the leading spirit player in Turkey and yesterday its 51% subsidiary EABL acquired the remaining 20% stake in Kenya Breweries for US$225m.

“Diageo is gradually changing into a higher growth machine through a better regional profile, although several acquisitions might still be relatively expensive.”

Alan Lodge, 08.06.2011