6th Feb 2008 07:01
Diageo PLC06 February 2008 Diageo and Nolet to form a 50/50 company for super-premium Ketel One vodka Diageo to pay $900 million for its equity stake London and Schiedam, The Netherlands (5 February 2008) - Diageo, the world'sleading premium drinks business, and the Nolet family have agreed to form a new50/50 company, which will own the perpetual exclusive global rights to sell,market and distribute the successful super-premium Ketel One vodka. Diageo has agreed to pay US$900 million for its 50% equity interest in the newlyformed company, which will be based in the Netherlands with the Nolet familyowning the other 50%. Due to its rights under the agreements Diageo will fullyconsolidate the financial results of the new company accounting for the Noletholding as a minority interest. Profits from the sales, marketing anddistribution operations will be shared broadly equally. The Nolet family will continue to own the brand rights for Ketel One and Diageowill become the exclusive distributor of the brand globally. Ownership of the Nolet distillery in Schiedam in Holland, where they have beendistilling since 1691 and where Ketel One vodka is manufactured will remain withthe Nolet family. The distillery will supply Ketel One vodka exclusively andperpetually to the new company at an agreed rate of return. Currently, Ketel One vodka has an annual volume of 1.9 million cases. It isprimarily a North American brand in the super-premium vodka segment and willcomplement Diageo's premium Smirnoff and its ultra-premium Ciroc brands.Similarly outside the United States Ketel One will expand Diageo's brand rangein vodka. The Nolet family and Diageo believe that this new relationship willaccelerate the growth of the brand in the USA and elsewhere in the world. The transaction is expected to close by 31 March 2008, subject to the requiredregulatory approvals and other conditions. Diageo expects that the transactionwill be EPS neutral in the first full financial year after closing and will beeconomic profit positive in year five using a weighted average cost of capitalof 9%. Both the Nolet family and Diageo consider this alliance to be perpetual.However, should either party ever decide to sell its stake in the company, theother party will have the right to purchase it at a price to be agreed. TheNolet family has an additional right to put its stake in the company to Diageoin the 4th or 5th year after closing for $900 million plus interest. If Diageobuys the Nolet family stake, full ownership of the brand will transfer toDiageo. Diageo can choose not to buy in exchange for a $100 million payment. Thefamily may then pursue a sale to a third party. Commenting today, Paul Walsh, Chief Executive, Diageo, said: 'This transaction is strategically important for Diageo, giving us an interestin an outstanding high quality brand and fantastic potential for global growthin the super-premium vodka segment. The new company represents a unique alliance in our industry. 'Diageo brings superior marketing and distribution expertise, together with atrack record of outstanding brand stewardship and the Nolet family brings atruly great brand, based on a high quality distillation operation and invaluableknowledge and heritage gained from over 300 years of tradition. 'We feel particularly honoured that the family have chosen Diageo as theirpartner in taking Ketel One vodka forward to the next stage of its development.We look forward to working with the Nolet family and their team.' Commenting on the transaction, Carel Nolet Sr, said: 'We are proud to be partners with Diageo, the world's leading premium drinkscompany, and look forward to working together with this team of highly talentedpeople. The partnership between Nolet and Diageo will combine our brand building andentrepreneurial skills with the unrivalled brand management, marketing anddistribution expertise of Diageo to fully develop the potential of Ketel Onevodka in the USA and globally.' UBS Investment Bank acted as financial adviser and Sullivan & Cromwell LLP andMorgan Lewis & Bockius LLP acted as legal advisers to Diageo in thistransaction. -ENDS- For further information For Diageo Investor RelationsCatherine James Kelly Padgett+44 (0)20 7927 5272 +1 202 715 [email protected] [email protected] For Diageo Media RelationsStephen Doherty Jennifer Crowl+44 (0)20 7927 5528 +44 (0)20 8978 [email protected] [email protected] Isabelle Thomas Gary Galanis+44 (0)20 7927 5967 +1 (203) 229 [email protected] [email protected] For Nolet in The Netherlands For Nolet in the USD. Istha Jennifer Vides Blake, Huijskens & Istha Weber Shandwick +31 20 685 5955 +1 (818) 612 5217 [email protected] For Nolet in LondonTerry Garrett, Heather Wilson, Weber Shandwick Weber Shandwick+44 (0)20 7067 0717 +1 (310) 722 [email protected] [email protected] Notes to Editor About Diageo Diageo is the world's leading premium drinks business. With its global vision,and local marketing focus, Diageo brings to consumers an outstanding collectionof beverage alcohol brands across the spirits, wine and beer categoriesincluding Smirnoff, Guinness, Johnnie Walker, Baileys, J&B, Cuervo, CaptainMorgan and Tanqueray, and Beaulieu Vineyard and Sterling Vineyards wines. Diageotrades in some 180 countries around the world and is listed on both the New YorkStock Exchange (DEO) and the London Stock Exchange (DGE). For more informationabout Diageo, its people, brands and performance, visit us at www.diageo.com About the Nolet Distillery and the Nolet family Since 1691 the Nolet family, through the Nolet distillery and other groupcompanies manages the production, distribution, sales and marketing of a rangeof super premium spirit brands including Ketel 1 Jenever and Ketel One vodka. The business has its origin in Schiedam, the Netherlands from where it stilloperates its distillery. The group focuses on personal relationships withdistributors, bartenders and its consumers that are essential for the success ofthe company and its products. In 2007 the company produced ca two million casesper year with a turnover of around Euro 165 million. The Nolet family isactively involved with the group under the leadership of 10th generation CarelNolet Sr and his son Bob Nolet, both based in Schiedam and his other son, CarlNolet Jr, based in California, USA. The group employs around 180 people. Cautionary statement concerning forward-looking statements This announcement contains "forward looking statements" within the meaning of 'Safe Harbor' provisions of the United States Private Securities LitigationReform Act of 1995 with respect to the financial condition, results ofoperations and business of Diageo and certain of the plans and objectives ofDiageo with respect to and outlook for these items. In particular, allstatements that express forecasts, expectations and projections with respect toand outlook for future matters, including trends in results of operations,margins, growth rates, overall market trends, the impact of interest or exchangerates, the availability of financing to Diageo, anticipated cost savings orsynergies and the completion of Diageo's strategic transactions, areforward-looking statements. Forecasts, expectations and projections withrespect to future financial performance on an earnings per share and economicprofit basis are based on a range of assumptions, including assumptions withrespect to current exchange rate forecasts, the effective corporate tax rate,trading conditions for Diageo and in markets generally, the success ofintegration of any joint ventures or acquired businesses, competition in andgrowth of premium drinks markets and assumed GNP growth in the United States.By their nature, forward-looking statements involve risk and uncertainty becausethey relate to events and depend on circumstances that will occur in the future.There are a number of factors that could cause actual results and developmentsto differ materially from those expressed or implied by these forward-lookingstatements, including factors that are outside Diageo's control. These factors include, but are not limited to: increased competitive product andpricing pressures and unanticipated actions by competitors that could impactDiageo's market share, increase expenses and hinder growth potential; theeffects of future business combinations, partnerships, acquisitions ordisposals, existing or future, and the ability to realise expected synergies and/or costs savings; Diageo's ability to complete existing or future acquisitionsand disposals; legal and regulatory developments, including changes inregulations regarding consumption of, or advertising for, beverage alcohol,changes in tax law (including tax rates) or accounting standards, changes intaxation requirements, such as the impact of excise tax increases with respectto the business, and changes in environmental laws, health regulations and thelaws governing pensions; developments in litigation or any similar proceedingsdirected at the drinks and spirits industry; developments in the Colombianlitigation and any similar proceedings; changes in consumer preferences andtastes, demographic trends or perception about health related issues; changes inthe cost of raw materials and labour costs; changes in economic conditions incountries in which Diageo operates, including changes in levels of consumerspending; levels of marketing spend, promotional and innovation expenditure byDiageo and its competitors; renewal of distribution or licence manufacturingrights on favourable terms when they expire; termination of existingdistribution or licence manufacturing rights on agency brands; technologicaldevelopments that may affect the distribution of products or impede Diageo'sability to protect its intellectual property rights; and changes in financialand equity markets, including significant interest rate and foreign currencyexchange rate fluctuations, which may affect Diageo's access to or increase thecost of financing or which may affect Diageo's financial results. All oral and written forward-looking statements made on or after the date ofthis announcement and attributable to Diageo are expressly qualified in theirentirety by the above factors and the 'risk factors' contained in the AnnualReport on Form 20-F for the year ended 30 June 2007 filed with the United StatesSecurities and Exchange Commission (SEC). Any forward-looking statements made byor on behalf of Diageo speak only as of the date they are made. Diageo does notundertake to update forward-looking statements to reflect any changes inDiageo's expectations with regard thereto or any changes in events, conditionsor circumstances on which any such statement is based. The reader should,however, consult any additional disclosures that Diageo may make in anydocuments which it publishes and/or files with the SEC. All readers, whereversituated, should take note of these disclosures. -ENDS- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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