Diageo has reached agreement to acquire Mey Içki, the leading spirits company in Turkey, for an enterprise value of TL3,300 million (£1,300 million) from investment firm TPG Capital (TPG) and Actera. The transaction is expected to complete in the second half of calendar 2011, subject to regulatory clearances.
Mey Içki is the leading spirits producer and distributor in Turkey. In the financial year ended 31 December 2010 the company had net sales of TL766 million (£300 million) and EBIT of TL305 million (£120 million). It is the clear market leader in Raki, the biggest spirits category in Turkey, and has a leading position in vodka. In addition the company has an extensive nationwide sales and distribution network.
The acquisition is:
- Eps accretive Year 1 by approximately 1%
- Economic profit positive Year 5 using a 13% weighted average cost of capital
- A high growth, high margin business
Turkey is a substantial fast growing economy with a growing and increasingly affluent middle class and consumer spending is forecast to be twice the rate of GDP growth. The acquisition of the leading spirits company in this very attractive emerging market will allow Diageo to accelerate the growth of its complementary international spirits brands with increased access through Mey Içki’s strong distribution network and customer relationships in Turkey. Mey Içki will be consolidated as part of Diageo Europe and will continue to operate under the current management team. They have delivered strong growth over the last 3 years and as part of the transaction they are investing a percentage of their equity into an employee incentive scheme.
The acquisition will be funded through existing cash resources and debt.
Paul Walsh, CEO of Diageo said:
‘Turkey is an attractive, growing market for Diageo with strong GDP growth. The acquisition of Mey Içki 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. The acquisition of Mey Içki will also provide Diageo with an outstanding platform from which to accelerate the long term growth of our premium international spirits brands in Turkey.
‘The acquisition meets our return criterion and delivers top line growth above the Diageo average, and margin expansion. I am delighted to welcome the Mey Içki brands and management team to Diageo. ‘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.’