LONDON: Treasury Wine Estates has agreed to buy out the majority of the American and UK wine business of one of the world’s largest alcohol companies, Diageo.
In a statement this morning, Treasury, the owner of brands like Penfolds, Wolfblass and Lindemans, said it had agreed to a cash payment of $754 million for Diagio’s US and UK wine operations.
The deal will also see Treasury assume $66.5 million in leases.
Diageo is a multinational alcohol company which owns Smirnoff vodka, Johnny Walker, Guinness and Bundaberg, among many other labels.
Since chief executive officer Michael Clarke assumed the role at Treasury last year, the company has been repositioning itself toward the premium end of the market, with a view to dropping underperforming commercial brands.
The company said buying Diageo’s wine business in the United States would double sales revenue of luxury and premium wines, as well as give it access to grapes from high-end vineyards.
Diageo owns premium vineyards in California’s Napa Valley wine region, and the United Kingdom wine brand Blossom Hill.
Treasury will raise $486 million through a share issue to help pay for the deal, with the balance to be funded by debt.
The company hopes the deal will aid its expansion into the major, established north American market, as well as developing markets in Latin America and Asia.
