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Diageo to Swap Brands With Cuervo

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Diageo to Swap Brands With Cuervo

Diageo Plc and Tequila Cuervo La Rojeña SA are in late-stage talks to swap liquor brands in a deal that would give London-based spirits giant Diageo the 50 per cent of Don Julio tequila it doesn’t already own, said a person familiar with the matter.

As part of the deal, Cuervo, owner of the Jose Cuervo brand of tequila, would get the Bushmills Irish whiskey brand. The value of assets swapped by each side would be about $1 billion, said the person, who asked not to be named because the matter is private. Diageo would get cash as part of any agreement, the person said.

A representative for Diageo declined to comment, while a representative for Cuervo wasn’t immediately available to comment.

Diageo, which produces Smirnoff vodka and Johnnie Walker Scotch whisky, has been trying to grow its tequila business and adding other spirits with recent acquisitions. The company bought United Spirits Ltd. in July, giving Diageo India’s largest liquor producer.

Diageo abandoned talks to acquire all of Cuervo in December 2012. It had distributed Cuervo outside Mexico since 1997, before terminating the long-term contract last year.

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The UK beverage company has made several tequila acquisitions, including the Peligroso and DeLeón brands. Don Julio is a premium brand of six types of tequila, including Don Julio 1942 and Don Julio Blanco.

Bushmills is an Irish whiskey founded in 1608. Diageo acquired the distillery in June 2005 for about $365 million. Diageo Chief Executive Ivan Menezes said during a conference call in July that Bushmills has underperformed in the US. “We have tried hard over the years to get this brand into growth, and we’ve struggled,” Menezes said.

The Wall Street Journal previously reported that the companies are near a deal to swap brands.

Bloomberg News, edited by ESM

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