Diageo seals deal to buy Mey Içki

Diageo seals deal to buy Mey Içki

Diageo has signed a deal to acquire Turkey's leading spirits producer, Mey Içki, in a US$2.1bn deal that will enhance the Smirnoff maker's presence in emerging markets.

Diageo said today (21 February) that it has agreed to acquire Mey Içki from TPG Capital and Actera for TRL3.3bn (US$2.1bn). Mey Içki is the leading seller of Turkey's local Raki spirit, while the group is also a leading vodka producer in the country.

The deal is part of Diageo's strategy to expand in emerging markets and, if approved by competition authorities, should help the group to offset ongoing weak sales in several other European countries, including neighbouring Greece.

"The acquisition of Mey Içki transforms our existing position in this fast growing spirits market," said Diageo's CEO, Paul Walsh. "It gives us leading brands in the major local spirits categories, a superior distribution network and a proven management team.

"The acquisition will also provide Diageo with an outstanding platform from which to accelerate the long-term growth of our premium international spirits brands in Turkey." 

Diageo's existing subsidiary in Turkey has annual operating profits of just GBP10m and has suffered alongside several other international drinks firms due to a six-year tax dispute with the country's customs authorities. Two weeks ago, just-drinks reported that this tax dispute could soon be resolved, clearing a path for multinational players to increase their scale in Turkey.

Mey Içki reported net sales of TRL766m in the 12 months to the end of December 2010. Its earnings before interest and tax were TRL305m.

Diageo expects to complete the deal in the second half of calendar 2011 and that Mey Içki will add 1% to group earnings per share from the first year. "The acquisition meets our return criterion and delivers top line growth above the Diageo average, and margin expansion," said Walsh.