Diageo acquires Turkish spirits firm for €1.54bn

GLOBAL drinks giant Diageo has remained true to its word of targeting bolt-on acquisitions in emerging nations as its preferred growth route — by announcing the £1.3bn (€1.54bn) takeover of Turkey’s leading spirits company Mey Icki.

The deal marks Diageo’s single biggest international acquisition in more than a decade and also gives the group the chance to push its premium drinks brands in a rapidly growing drinks market.

Turkey is also one of the fastest growing world economies, with an increasingly affluent middle class and rising consumer spending patterns, which are forecast to increase at double the rate of the nation’s GDP growth.

“Turkey is an attractive, growing market for Diageo, with strong GDP growth. The acquisition of Mey Icki transforms our existing position in this fast growing spirits market.

“It gives us leading brands in the major local spirits categories, a superior distribution network and a proven management team,” said Diageo chief executive Paul Walsh yesterday.

Mey Icki — which will be subsumed into the Diageo Europe business — is the leading maker of Turkey’s favourite tipple, Raki, an aniseed-flavoured spirit, and has a leading position in the local vodka market. Last year the company generated net sales of around £300m, with earnings of £120m.

Mr Walsh added that the deal — which will be funded via a mix of debt and existing cash resources — meets Diageo’s criteria for financial returns from purchases and will deliver top-line growth above Diageo’s current average, as well as margin expansion.

“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,” he added.

At Diageo’s first half results announcement, earlier this month, Mr Walsh said that the group’s growth would come more from expanding in emerging markets than through high profile ‘big-ticket’ global mergers.

Meanwhile, Danish brewing giant Carlsberg has reported a 21% fall in net income for its fourth quarter (to 301m kroner/€40.4m) on the back of increased costs for beer ingredients.

The company relies heavily on eastern Europe for its earnings and record droughts there cut the amount of grain harvested in the region last year and led to increases in related commodity prices.