Bacardi Ltd. said on Monday it would buy high-end tequila maker Patron Spirits International AG in a $5.1 billion deal, hoping to become the second largest spirits company in the United States by market value.
Kirsten Korosec of Fortune had the news:
Bacardi is a privately held company that has owned a 30% stake in Patrón Spirits International AG for nearly a decade. The transaction is expected to close in the first half of 2018. The deal will make Bacardi the number one spirits player in the super-premium segment in the United States, said Bacardi, referring to the most IWSR data. It would also make Bacardi the second largest spirits company in market share by value in the U.S market.
While the U.S. market is important. Bacardi sees opportunity to grow the brand outside of U.S. markets. Tequila is one of the fastest-growing and most attractive categories in the spirits industry. In 2016, 15.9 million nine-liter cases were sold in the U.S., according to the latest data from Distilled Spirits Council. Since 2002, tequila volumes have grown 121%, an average rate of 5.8% per year.
“Adding Patrón to the Bacardi portfolio creates a tremendous opportunity for the brand outside of the United States as Bacardi’s international distribution network will help grow Patrón around the world, increasing scale in the U.S. and globally,” Bacardi Limited CEO Mahesh Madhavan said in a statement.
Bacardi’s spirits portfolio includes Grey Goose vodka, Bombay Sapphire, Dewars, Martini, and premium tequila maker Cazadores and Corzo.
Noah Kirsch of Forbes reports that Patron’s billionaire owner is cashing out:
As part of the acquisition, Patrón cofounder John Paul DeJoria—who is currently worth an estimated $3.4 billion, according to Forbes—will sell his 70% stake in the company. Because Bacardi’s purchase price includes the assumption of Patrón’s debt (which is not publicly disclosed), it’s not yet clear how DeJoria’s net worth will change once the deal is completed.
DeJoria launched Patrón in 1989 with cofounder Martin Crowley, who died in 2003. Following a prolonged legal battle, DeJoria bought out the Crowley estate’s stake in the company and became Patrón’s majority owner in 2008, the same year Bacardi first invested.
In Monday’s press release, he reflected on his legacy at the business. “Today…we produce more than three million cases of distilled spirits annually that are enjoyed around the world. I am proud of what our entire organization has accomplished,” he said. DeJoria will remain with the firm as “an ambassador for Patrón in the role of Chairman Emeritus.”
Angelica LaVito of CNBC.com reported that tequila is a fast-growing liquor category:
The deal will make Bacardi the No. 1 spirits player in the super-premium segment in the U.S. and the second largest spirits company in market share by value in the U.S., the company said, citing IWSR data.
“Adding Patron to the Bacardi portfolio creates a tremendous opportunity for the brand outside of the United States as Bacardi’s international distribution network will help grow Patron around the world, increasing scale in the U.S. and globally,” said Mahesh Madhavan, CEO of Bacardi Limited.
Tequila has been a very fast-growing category, which has benefited from consumers’ shifting taste away from beer and vodka. Since 2002, tequila volumes have grown about 6 percent each year, on average, according to the Distilled Spirits Council.
Patron’s leadership will remain in place when the deal closes. The deal is expected to close in the first half of this year.
