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Brown-Forman to sell Southern Comfort, Tuaca to Sazerac for US$544m

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Brown-Forman has agreed to sell its Southern Comfort and Tuaca spirits brands to Sazerac in a deal worth US$543.5m.

Sazerac will take over the whole Southern Comfort range from Brown-Forman

Sazerac will take over the whole Southern Comfort range from Brown-Forman

The company said the divestment reflects its "evolving portfolio strategy" and will allow it to focus resources on its "highest strategic priorities". The sale is expected to complete on 1 March, subject to regulatory clearance.

According to analysts at Cowen & Co, the two brands combined represent around 7% of Brown-Forman's annual volumes, suggesting that Sazerac will pay in the region of 2x annual sales.

Sales of whiskey-based liqueur Southern Comfort, which Brown-Forman has owned since 1979, have been declining for some years, despite support from Brown-Forman. A marketing campaign in 2013 helped to bring the brand back to relevance after five years of declines, but sales slipped again and, in first-half results released in December, Southern Comfort was down 7% in volumes and sales.

The declines led to industry speculation that Brown-Forman would sell the brand, with Reuters reporting in October that Goldman Sachs had been hired to investigate its divestment. CEO Paul Varga said last month that the company likes to focus on "fewer trademarks... that have great growth profiles".

However, in November, Brown-Forman gave further support to Southern Comfort with a new marketing campaign featuring comedian and actor Danny McBride.

Italian liqueur Tuaca was also highlighted in the Reuters report as being up for sale. Nomura analysts said last year that while Southern Comfort was worth $650m, Tuaca could be bought for $50m. Brown-Forman started distributing Tuaca in the US in 1999 and acquired 45% of previous owner Distillerie Tuoni e Canepa in 2000. In 2003, it acquired the rest of the company.

The third brand reported to be for sale, the super-premium black raspberry liqueur Chambord, remains part of Brown-Forman's portfolio. 

Sazerac CEO Mark Brown said the company was "very excited about the opportunity to acquire such iconic brands".

Brown added: "Brown-Forman has done an excellent job of building both brands over the years and we are looking forward to many more years of successful brand building."

To read Brown-Forman's official statement, click here.

For a just-drinks analysis of this transaction, click here


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