LONDON: Diageo Plc has agreed to buy George Clooney’s high-end tequila brand Casamigos for up to $1 billion, as the world’s largest spirits maker seeks to lift its presence in a high-growth market.
Several new, high-end tequilas has helped the drink change its traditional image as a party beverage for young drinkers. Its sales rose 5.2% globally last year, according to data tracker IWSR, outperforming a spirits industry that edged up only 0.3%.
Diageo did not disclose revenue or profit figures, but Morgan Stanley estimates the deal’s enterprise value was about 20 times annual turnover, which an industry source said would make it much pricier than other spirits deals, which he said often get done at about 4-6 times sales.
Diageo’s North American president, Deirdre Mahlan, told reporters that high-growth companies like Casamigos were “notoriously challenging to value under traditional methods”.
Casamigos, which means “house of friends,” was founded in 2013 by Clooney and his friends—nightlife entrepreneur Rande Gerber, who is married to model Cindy Crawford, and real estate developer Mike Meldman.
Diageo, which has arrangements with other celebrities including David Beckham and Sean Combs, said Casamigos would be neutral to earnings for the first three years and add to earnings thereafter.
“If the brand sustains its growth, it could potentially be the next Patron,” Morgan Stanley analysts said, citing the biggest competitor in high-end tequila. “But if not, it might be value destructive.”
They said the success of Casamigos, which has grown 54% over the last two years, depended on the brand owners’ star status, and flagged a risk of losing focus in the next 10 years.
The brand sold 120,000 cases in 2016, primarily in the US, and is on track to reach over 170,000 by the end of the year. Diageo said expanding the brand to Europe would be a source of future growth. Casamigos sells for $45-55 per bottle, about the same as Diageo’s Don Julio tequila.