The Californian assets are valued at about US$260m

The Californian assets are valued at about US$260m

Diageo has secured a sale-and-leaseback arrangement for some of its wine assets in the US.

The drinks giant confirmed today (24 June) that certain land and facilities in Napa Valley in California will be acquired then leased back to its Diageo Chateau and Estate wines unit by Realty Income Corporation under a 20-year lease. Diageo will also hold options to extend the lease for up to 80 years in total.

The assets are valued in the region of US$260m.

“DC&E remains the operator of the properties under the lease agreement and retains ownership of the brands, vines and grapes, which remain a strategic part of Diageo’s wine business,” the company said.

The benefit to free cash flow in the year to the end of June is expected to be in the region of $200m. The transaction will also improve the return on invested capital of the DC&E business.

The agreement is expected to close by the end of this month.

Last month, Diageo began a review of DC&E, which resulted in a reduction in workforce and may also include the sale of non-strategic brands.

For the current financial year, to the end of June, the impact of the restructuring, including the sale and leaseback, will be “broadly neutral” as the profit on the sale of land is offset by restructuring costs, inventory impairment and provisions made against the disposal of non-strategic brands.