Diageo poised to take Cuervo tequila share

Diageo is reportedly weeks away from securing a deal to acquire tequila brand Jose Cuervo for over US$3bn, with current owners the Beckmann family discussing whether to remain a shareholder of the business.

Ongoing discussions between the two parties are set to reach a head imminently as Cuervo’s distribution contract with the Smirnoff owner approaches its June 2013 expiry date.

According to Reuters, the Beckmann family are keen to retain an initial 70-80% majority share in the Cuervo business rather than face changing distributor when its contract comes to an end next summer. The deal will then allow Diageo to move in on a majority stake at a later date.

One source close to the talks told Reuters: “A deal with Diageo taking a minority stake in Cuervo for cash or shares seems the most likely outcome with an agreement expected in the next six weeks.”

When talks began between the two businesses last year, Diageo chief executive Paul Walsh expressed his concerns that Cuervo was not realising its potential in the US, where sales outside North America fell 11% in the last six months of 2011.

It is thought that Diageo will be better positioned to increase resources and boost global growth of the Cuervo brand once it has acquired an equity stake in the business.