By Elisa Anzolin and Emma Rumney
MILAN/LONDON (Reuters) -Italy's Campari (LON:0ROY) on Thursday agreed to buy historic French cognac house Courvoisier from Beam Suntory for $1.2 billion, marking a big push into brandy with Campari's biggest acquisition on record.
The purchase of a top four cognac brandy is the crowning achievement for Chief Executive Bob Kunze-Concewitz, who is due to leave next year after steering Campari through a long list of deals, including the purchase of Grand Marnier for 490 million euros in 2016.
"Christmas came early for Campari this year," Kunze-Concewitz told analysts.
The Italian group, which wants half of its growth to be powered by acquisitions as it looks to become a more serious contender to spirits giants Diageo (LON:DGE) and Pernod Ricard (EPA:PERP), said cognac would now become the fourth major part of the group, alongside aperitifs, bourbon and tequila.
Campari previously owned only one smaller cognac brand, Bisquit, according to its website, though Grand Marnier, a blend of cognac and orange liqueur, is a key part of its portfolio.
The deal will strengthen Campari's presence in the United States, which accounts for 55% of Courvoisier's sales, and offers transformational potential in the Asia Pacific region - also a large cognac market, led by China.
Building market share in the United States and China is critical to the group's better competing with its larger rivals.
The deal is expected to boost Campari's net sales by around 9%, Kunze-Concewitz told analysts, adding that it was also a rare opportunity to expand the company's premium spirits portfolio and its production and bottling capacity in France.
First, however, Campari would look to re-launch the Courvoisier brand, replicating a template it followed for other acquisitions.
"Clearly this is a brand which fits into our playbook, and we expect to relaunch and grow it substantially as we've done with some of the other brands," Kunze-Concewitz said. "With our marketing model we can get this brand to perform at a really different pace."
Campari expects Courvoisier to lift earnings per share by 2%.
Initially, however, the acquisition is expected to take around 80 basis points off the group's gross profit margin.
Sales at Courvoisier, founded in 1828, declined 33% in the 10 months to Oct. 31 versus a year earlier, Campari said. It said the reasons were slowing U.S. sales after post-COVID peaks and the process of de-stocking by wholesalers that had filled their warehouses excessively.
The deal, expected to close next year, envisages an additional earn-out of up to $120 million, to be payable in 2029, Campari said in a statement, adding that it would fund the acquisition via a mix of debt, cash and equity or equity-like instruments.
It has secured from a group of banks a fully committed 1.2 billion euro bridge loan with a duration of up to 24 months and will monitor markets for possible issuance.
Beam Suntory President and CEO Greg Hughes said the company would focus on its core strengths as it looks to accelerate its own global growth ambitions.