Analysis - CL Financial woes behind Burn Stewart Distillers sale?
CL Financial bought Burn Stewart in 2002
Today's sale of Burn Stewart Distillers to Distell may be a “vote of confidence” in the Scotch whisky industry. But it is also a symbol of the continued fallout from the near collapse of Burn Stewart's Caribbean owner, CL Financial.
In January 2009, the Trinidad & Tobagan government and central bank was forced to bail out CL Financial after the global recession bit into its wide array of interests, including construction and real estate and the Angostura bitters brand. The repercussions from the rescue package are still being felt in Trinidad & Tobago, but back in 2009 it was a seismic shock to the nation.
CL Financial had only just bought Lascelles, de Mercado and Co through its Angostura division for about US$700m and seemed in rude health.
But, soon drinks commentators were wondering which assets CL Financial would jettison first to settle its score with the government. Hine Cognac was mooted as ripe for market, but has stayed firmly in CL's hands since it was bought from LVMH in 2003.
It was only a matter of time, however, before Lascelles was moved on, as it had little chance of gaining the investment it needed from CL following the bailout. Sure enough, last year Gruppo Campari stumped up $409m for the Wray & Nephew rum owner.
In contrast, CL bought Burn Stewart in December 2002, and since then has set up its drinks operations (CL World, which ran Burn Stewart) in the UK and brought Burn Stewart's sales division back in-house. It also took Burn Stewart's Scottish Leader to the top of the blended Scotch category in the key Taiwanese market while securing an Africa JV with Distell, a deal that helped pave the way to today's announcement.
It is a lot of investment and effort, reflected in the US$244m price tag, but while it is currently a sellers market in Scotch as companies chase mature stocks to satiate booming global demand, CL's financial predicament possibly forced it into a sale. Burn Stewart head Fraser Thornton told me today that Distell can “fund the next stage of the expansion of the business”, suggesting that the investment was not forthcoming from CL.
And, hopefully, the money made from today's deal will give CL the opportunity to focus on the brands it still has left in its portfolio.
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