Comment - Diageo heads renewed M&A gossip
Diageo linked to deals as acquisition rumours resurface
Diageo is leading a renewed flurry of speculation on mergers and acquisitions in the global drinks sector.
Could another round of consolidation on the global beer, wine and spirits markets be brewing? Investment bankers appear to have recovered from the financial sector's binge-induced hangover, also know as the global recession, and have set about thawing relations between potential partners in the drinks industry.
Little is certain, but what is certain is that Diageo is becoming the default suitor for any number of assets. Last month, observers and analysts cranked up their rumour mills with bags of speculation on Diageo's impending move for Moet Hennessy. For a moment, it seemed as though something might happen, but then we slipped back into the pattern of 'Diageo wants to buy, LVMH doesn't want to sell'.
There has been no time to catch our breath, however. This week, it emerged that hedge fund owner Bill Ackman has built up an 11% stake in Fortune Brands and is reportedly seeking to force a break-up of the company's strange collection of drinks brands, golfing equipment and home hardware.
Fortune's Beam Global Spirits & Wine business would certainly be attractive to many in the drinks sector, although competition issues mean that it would probably have to be broken up. Diageo is keen to build its scale in North America and Jim Beam Bourbon would be a great way to do it. The company does not own a Bourbon brand, which has naturally fuelled rumours that the deal is as good as done.
As Fortune's future was debated, Remy Cointreau announced in a matter-of-fact manner that it would ditch its Champagne business. For once, just-drinks understands that Diageo does not want it. However, Pernod Ricard has been named as one possible buyer.
This is just some of the wheeling and dealing that has been fuelling drinks industry gossip in the last couple of months. Of course, we could add the ongoing speculation over Foster's Group's beer and wine demerger, SABMiller's link to Castel's African beer business, Gruppo Campari's new-found thirst for acquisitions and even reports that "representatives" of Danone have been hawking around the group's water business in Japan.
Meanwhile, Diageo is actually seeking to buy control of Chinese spirits maker Shui Jing Fang and has started talks on its "future relationship" with Zacapa rum.
What does it all mean? Well, I'm generally of the opinion that there is no smoke without fire. As the global economy begins to pick up and companies start to assess the fallout, we could well be on the verge of a new round of deals in the global drinks sector.
We should not be too surprised that Diageo has ended its flirtation with Stock Spirits....
Patrón Spirits has poached an executive from Diageo to replace its current executive VP for sales in North America....
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