Diageo pays out €1.5bn for Turkish spirits firm
DIAGEO has paid out £1.3bn (€1.5bn) in a determined move to bolster its presence in Turkey's fast-growing drinks market.
It has bought the Mey Icki Sanayi ve Ticaret spirits business from TPG Capital, the American private equity company. Diageo believes the deal will significantly expand its presence in Turkey, enabling it to sell more of its flagship products, such as Johnnie Walker whisky.
Mey has access to 50,000 retail outlets in the country and a near-80 per cent share of the Turkish market for raki, the national drink.
It also produces vodka, gin and flavoured liqueurs.
TPG, which had been considering floating Mey, bought the previously state-owned company for about $800m in 2006. The purchase will add 1pc to Diageo's earnings per share in the first year of ownership, the company said. The purchase will be funded through existing cash resources and debt.
Diageo, whose products include Tanqueray gin and Smirnoff vodka, is trying to boost its business in rapidly developing countries. Two- thirds of its sales come from the developed world.
Chief executive Paul Walsh said: "This investment represents the continuation of our strategy to increase Diageo's presence in those emerging markets, such as China and Vietnam, which have a rapidly growing middle class."
Jamie Isenwater, a Deutsche Bank analyst, said: "The acquisition looks both financially and strategically sound. At less than 10 times historic ebitda, the valuation looks reasonable."
Diageo decided to go ahead with the deal as a six-year customs dispute with Turkey approached a resolution.