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Deutsche Bank forecasts merger for Campari

Aperol owner Campari Group could be looking to buy or merge with a spirits company that has exposure to the US and Asia, analysts at Deutsche Bank have predicted.

Aperol Campari Group
Campari Group’s portfolio includes orange apéritif Aperol

A research note led by Mitch Collett, analyst at Deutsche Bank Research, estimates that Italian group Campari has up to €30 billion (US$32.5bn) in ‘equity-funded firepower’ after major shareholder Lagfin secured additional voting rights on 4 August.

As such, Deutsche Bank believes Campari ‘continues to actively consider deals’.

The German bank said management commentary suggested Campari was interested in companies that have premium brands and are exposed to the US and Asian markets.

After assessing the top 50 spirits companies, Deutsche Bank predicts that three firms could be on Campari’s radar: Edrington, Rémy Cointreau and William Grant & Sons.

The bank said these companies meet the nine-point criteria that Campari could be considering, including having an enterprise value of at least US$5.5bn and less than €30bn, and having 30% of global sales in premium-and-above brands.

Analysts also highlighted three other companies that have eight of the attributes: Jose Cuervo Tequila owner Proximo Spirits, French conglomerate LVMH and US drinks firm Brown-Forman.

‘Attractive asset’ 

Glasgow-headquartered firm Edrington produces Scotch brands The Macallan, Highland Park and Famous Grouse, and Brugal rum.

Edrington is owned by a charity, The Robertson Trust, while Japanese spirits giant Suntory has owned a 10% stake in the Highland Park maker since 2020. These could be challenges when considering a deal with the privately-owned firm, Collett said.

“We believe Edrington is an attractive asset and a good fit for Campari’s objectives however it is difficult to know if a company controlled by a charitable trust could be acquired and we note that the group has turned down prior buyout offers including one as far back as 1947 from Seagram,” Collett said.

“We also see Suntory’s 10% stake as a potential issue albeit it does indicate that the trust has been open to external investment in the past.”

Edrington has a 70% stake in The 1887 company, which controls single malt brand The Macallan, while fellow Scottish spirits firm William Grant owns the remaining 30%.

Founded in 1887, William Grant’s portfolio includes Scotch brands Glenfiddich and Grant’s, Hendrick’s Gin and Tullamore Dew Irish whiskey.

Deutsche Bank also said publicly-listed French group Rémy Cointreau, the world’s third-largest Cognac maker, was a ‘good strategic fit’ due to its exposure in the US and China, and ‘significant inventory assets’.

However, it warned that majority shareholders ‘may be an issue’ with Orpar controlling 47.6% of voting rights.

The bank also noted that the French firm has often expanded into other alcohol categories (such as American whiskey), suggesting an interest in diversification.

‘Sector-leading growth’

Campari Group’s portfolio includes Wild Turkey Bourbon, Skyy Vodka, Grand Marnier liqueur, Campari liqueur, and Jamaican rum Appleton Estate.

Deutsche Bank said Campari’s current share price ‘fails to reflect the company’s sector-leading growth or the opportunity to create value with M&A’.

The company saw organic net sales increase by 14.2% for the first six months of 2023, led by apéritifs, Tequila and premium Bourbon.

In November 2022, the CEO of Campari Group said the company was open to further acquisitions in American whiskey and “very interested” in growing its Mexican portfolio.

Campari has completed 41 transactions since 1995, reaching a total value of €3.8bn (US$4.1bn), Deutsche Bank said. Five of these deals were made in the past year, including the purchase of Kentucky’s Wilderness Trail Distillery.

The Spirits Business has approached Campari Group for comment.

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