Diageo to acquire George Clooney’s Casamigos tequila for up to $1 billion

Diageo Plc has agreed to buy George Clooney’s high-end tequila brand Casamigos for up to $1 billion, as the world’s largest spirits maker seeks to lift its presence in a high-growth market.

Diageo said it would pay $700 million initially for the firm, co-founded by the American actor, with potential payment of a further $300 million linked to performance over 10 years.

The deal comes two weeks after Pernod Ricard took a stake in mezcal maker Del Maguey, and highlights the opportunity firms see in Mexico’s native spirits.

Several new, high-end tequilas has helped the drink change its traditional image as a party beverage for young drinkers. Its sales rose 5.2% globally last year, according to data tracker IWSR, outperforming a spirits industry that edged up only 0.3%.

Diageo did not disclose revenue or profit figures, but Morgan Stanley estimates the deal’s enterprise value was about 20 times annual turnover, which an industry source said would make it much pricier than other spirits deals, which he said often get done at about 4 to 6 times sales.

Diageo’s North American president, Deirdre Mahlan, said firms like Casamigos were “notoriously challenging to value under traditional methods”.

Casamigos, which means “house of friends,” was founded in 2013 by Clooney and his friends — nightlife entrepreneur Rande Gerber, who is married to model Cindy Crawford, and developer Mike Meldman. They will continue to promote the brand.

Diageo, which has arrangements with other celebrities including David Beckham and Sean Combs, said Casamigos would be neutral to earnings for the first three years and add to earnings thereafter.

“If the brand sustains its growth, it could potentially be the next Patron,” Morgan Stanley analysts said, citing the biggest competitor in high-end tequila.

The brand sold 120,000 cases in 2016, primarily in the US, and is on track to reach over 170,000 by the end of the year. Diageo said expanding the brand to Europe would be a source of future growth. Casamigos sells for $45 to $55 per bottle, about the same price as Diageo’s other Don Julio tequila.