US: B-F closes cut-price Herradura deal
Brown-Forman has finally completed its purchase of Tequila producer Casa Herradura.
The US wine and spirits group said the purchase will come in US$100m lower than originally announced. Brown-Forman will pay $776m for all of the assets of Herradura, instead of the originally agreed $876m. The price cut came about "by mutual agreement of the parties", Brown-Forman said yesterday (18 January).
"We are very excited about this acquisition which gives us two strong brands competing at the super-premium and premium levels in the world's largest Tequila markets - the US and Mexico," said Brown-Forman CEO Paul Varga.
"We believe Herradura, with its rich heritage, is a jewel in the Mexican Tequila category. We expect these brands will help us advance our entire business within the growing Hispanic population of the US, and that the Casa Herradura infrastructure in Mexico gives Brown-Forman a strong business platform in yet another important international market."
Brown-Forman, whose financial year ends on 30 April, noted that earnings dilution from the purchase should be between $0.14 and $0.18 per share for its fiscal year, an increase on the earlier estimate of $0.08 to $0.12.
This is a result, Brown-Forman said, of expected lower profitability of the business in Mexico, higher upfront transition costs - including the purchase of US distributor inventory - and the effect of amortising the buy-out of US distribution rights for the Tequila Herradura brand over the next five years.
These higher costs are anticipated to be partially offset by lower interest expenses.
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