Diageo plans to make its biggest purchase in more than a decade by acquiring Mey Icki in a transaction that values Turkey’s largest maker of Raki at 3.3 billion Turkish lira ($2.1 billion).
The acquisition will add 1 per cent to Diageo’s earnings per share in the first year of ownership, the world’s biggest distiller said in a statement today. The deal will be funded through existing cash resources and debt.
“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,” said Diageo CEO Paul Walsh.
Diageo, the owner of Smirnoff vodka and Johnnie Walker Scotch whisky, aims to make acquisitions in markets where growth is the fastest, CFO Deirdre Mahlan said in an interview this month, after the company reported first-half revenue and profit that missed analysts’ estimates. Mey Icki controls 80 per cent of the market for Raki, according to Diageo.
“We see the Turkish market having high growth potential and Mey Icki’s market position is attractive with relatively high margins,” analysts including Jason DeRise at UBS in London wrote today in a note before the acquisition was announced. “Diageo still has options” for other acquisitions.