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Diageo ditches Jose Cuervo distribution

After more than 18 months of negotiations, Diageo has announced it will not be buying Jose Cuervo Tequila, and will instead cease distributing the brand.

Jose Cuervo Diageo
Despite such lengthy talks, Diageo will not be buying Jose Cuervo Tequila

The multinational drinks group had been discussing the possibility of taking a stake in the Beckmann family-owned Tequila brand, for which it handles the majority of its global distribution, since mid-2011.

It was thought a deal that would leave the Beckmann family with 70-80% of the business, but allow Diageo to move in on a majority stake at a later date, would eventually be agreed.

Talks were rumoured to have been intensifying over the past few months as the pair approach the expiration of Diageo’s distribution contract in June 2013.

However in a statement issued this morning, Diageo has confirmed talks have broken down, with neither side able to reach an agreement.

As such, it said, the contract to distribute Jose Cuervo Tequila – the largest Tequila brand in the world – will be allowed to expire on 30 June 2013.

Paul Walsh, chief executive of Diageo, said the group was only prepared to continue distributing Jose Cuervo if it had a stake in the business.

“Diageo has had a long and successful relationship with the Cuervo brand and we are proud of what we have achieved for the brand as its distributor over many years,” he said. “We believe that the future of the brand would be best delivered by aligning ownership of the brand with its route to market and I have no doubt that Diageo has the best route to market for this brand.

“However it has not been possible to agree a transaction which delivers value for Diageo’s shareholders and therefore, by mutual agreement, we have terminated our discussions.”

The news comes just hours after reports that Diageo is in discussions with Japanese brewer Suntory, amongst other companies, to acquire a stake in US drinks giant Beam.

It was thought yesterday that such an acquisition would not be formerly approached until Diageo had completed all active acquisitional discussions.

Now that a buyout of Jose Cuervo Tequila is off the table, it is thought Diageo may make a move for Beam sooner than first expected, although its £1.2bn purchase of 53.4% of Indian spirits company United Spirits will not complete until next year.

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