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Stock Spirits buys Distillerie Franciacorta

Central and eastern European group Stock Spirits has signed a deal to acquire Italian grappa producer Distillerie Franciacorta for €23.5 million (US$27m).

Italy’s Distillerie Franciacorta produces spirits, liqueurs and wines

The deal includes the Italian firm’s entire spirits and liqueur business, along with land for the construction of a new production facility. The purchase price is up to €23.5 million (US$27m) with an additional €3m (US$3.4m) for the land, payable in three tranches.

As part of the deal, Stock Spirits will obtain a long-term lease of the historic Borgo San Vitale site, the distillery and visitor centre.

The transaction also includes the Franciacorta wine brands, however the vendor will retain the wine manufacturing operations.

Completion of the agreement, which is conditional upon consultation with trade unions as well as certain restructuring steps, is projected to happen in the second quarter of the year.

Distillerie Franciacorta, which is based in Franciacorta, in the Lombardy region of Italy, was founded in 1901.

According to IWSR figures, the grappa category is Italy’s fourth-largest spirits category with the Franciacorta brands positioned to grow by 5% in value from 2016 to 2017 in the premium price segment.

Stock Spirits will become the number one branded grappa business by value in the Italian off-trade as a result of the deal.

Distillerie Franciacorta’s unaudited sales reached €9.7m (US$11.1m) in 2018. Pro-forma operating profit was €2m (US$2.2m). The value of the gross assets of the Italian business is expected to be €12m (US$13.7m) upon completion.

Stock Spirits expects the deal will produce “neutral” earnings in the first complete year of ownership with profits enhanced thereafter when it is expected to exceed the cost of capital.

The UK-headquartered firm sees “clear synergies with its existing operations” in the on-trade, where it can “leverage Distillerie Franciacorta’s strong presence”, and in the off-trade, where the “acquired brands will benefit from Stock Spirits’ current strengths”.

Stefano Gozio, one of the selling shareholders of Distillerie Franciacorta and a member of the founding Gozio family, will continue to act as a brand ambassador and consultant to Distillerie Franciacorta.

“We are delighted that a business that so clearly understands our values, brands and heritage is acquiring Distillerie Franciacorta,” said Gozio.

“Mirek and his team at Stock Spirits have made it clear that they will nurture and grow the Franciacorta brands, and that they realise the importance of maintaining production locally.

“We are thrilled to be joining their operations, and look forward to an exciting new chapter for everyone associated with Distillerie Franciacorta.”

Mirek Stachowicz, chief executive of Stock Spirits, said: “This is a truly compelling opportunity that we have been looking at for more than a year now, and we see clear and attractive synergies with our existing Italian operations.

“Distillerie Franciacorta’s deep expertise in local, premium products resonates strongly with Stock Spirits’ wider strategy of investing in well-loved national brands with genuine and high quality provenance.

“This is our first step in pursuing in-market consolidation opportunities in Italy, and Distillerie Franciacorta will strengthen our position in what is a fragmented but highly attractive market for us. It should also be seen as a clear reflection of our willingness to undertake value-creating M&A as part of our four-pillar growth strategy.

“We welcome Stefano and look forward to working with him in the next phase of the Distillerie Franciacorta story.”

However, the deal has been criticised by Western Gate – Stock Spirits’ largest shareholder – following calls for the removal of Stock Spirits’ chairman and senior independent director over concerns regarding “significant shareholder value destruction”.

A spokesperson for Western Gate said: “Assuming this is a cash acquisition, it will be immaterial to the company’s balance sheet.

“Stock Spirits will continue to have the lowest net debt/EBITDA position among its peers and its ability to deliver cash back to shareholders through a higher and or special dividend or do further M&A is unchanged.

“This simply does not go far enough and is another example of Stock Spirits only acting under pressure from shareholders.”

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