Diageo rumoured to be selling off $1bn worth of brands

Global drinks producer Diageo is thought to be selling off a raft of US-focused spirits brands, including Goldschlager and Myer’s Rum, estimated to be worth up to US$1 billion.

Diageo is expected to confirm plans to sell off its brands when it announces its full year results in July.

As reported by Sky News, chief executive, Ivan Menezes, has put a portfolio of US-focused spirits brands on the market as part of its continued efforts to streamline its portfolio and offload non-core brands, focusing on its more premium labels.

Brands earmarked for sale include Myer’s Rum, which launched in the US in 1934; Popov, a vodka label; Romana, a Sambuca brand; and Goldschlager, a cinnamon schnapps known for containing flakes of gold leaf.

It comes as Diageo, which has more than 200 brands, continues its work to streamline its portfolio, having sold its wine business in 2016 to Treasury Wine Estates for £361 million, as well all of its interests in the brewing industry. In 2015, it sold Scottish hotel-and-golf resort Gleneagles Hotel Ltd for £200m.

Most recently, Diageo bought George Clooney’s Tequila brand Casamigos in a deal worth between $500 million to $1bn.

According to Sky News, Diageo is keen to sell the brands in a single transaction, rather then selling each brand individually, with the process expected to last several months. Diageo is expected to confirm the plans with its full year results in July.

Diageo declined to comment on the prospective sale itself, with a spokesperson for the company stating: “We regularly review our portfolio to ensure we are maximising shareholder value.”

In its half year results ending 31 December, Diageo reported a 1.7% uplift in net sales in its 2018 half year results, which reached £6.5 billion, driven by Tequila and gin.

Diageo bought George Clooney and Rande Gerber’s Tequila brand Casamigos for $1billion last year

Reported net sales (£6.5 billion) and operating profit (£2.2 billion) were up 1.7% and 6.1% for the half year ended 31 December 2017, while organic net sales rose 4.2%, exceeding the 3.7% average estimated among analysts, according to The Financial Times.

All regions contributed to a “broad based organic net sales growth”, up 4.2%, across the board, while overall organic volumes grew 1.8%, a result that Diageo said had been “partially offset by adverse exchange” conditions.

It expects exchange fluctuations to take a £460m bite from its net sales, and £60m from its operating profits in its end of year results to 30 June 2018.

Pre-tax profits climbed 6.3 per cent to £2.2bn, while cash flow continued to be strong and in line with last year, with net cash from operating activities at £1.2 billion and free cash flow at £1 billion. The interim dividend increased 5% to 24.9 pence per share.