RUM PLUS TEQUILA EQUALS NEW COMPANY. Bacardi is Buying Patrón – By Todd Horwitz, Bubba Trading

 

RUM PLUS TEQUILA EQUALS NEW COMPANY

Bacardi is Buying Patrón

Bacardi Ltd. is acquiring the maker of Patrón tequila in a deal that values the premium brand at $5.1 billion, one of the biggest liquor buys in years as rival’s scramble to own more top-shelf spirits. Bacardi, best known for its namesake rum, has held a 30% stake in Patrón Spirits International AG for nearly a decade, according to people familiar with the matter.

Bacardi is now buying full control with plans to distribute the Mexican-made liquor more widely and cash in on demand for high-end tequila, the company said. The two privately held companies on Monday announced the transaction, which was earlier reported by The Wall Street Journal.

While the U.S. market is important. Bacardi sees opportunity to grow the brand outside of U.S. markets. Tequila is one of the fastest-growing and most attractive categories in the spirits industry. In 2016, 15.9 million nine-liter cases were sold in the U.S., according to the latest data from Distilled Spirits Council. Since 2002, tequila volumes have grown 121%, an average rate of 5.8% per year.

Bacardi, which dates back 156 years to its founding in Cuba, is still controlled by its founding family, though it switched CEOs last year and appointed Mahesh Madhavan to run day-to-day operations. Mr. Madhavan is a 20-year company veteran who took over in October. The Bermuda-based company, which also owns Grey Goose vodka and Dewar’s Scotch, has been trying to diversify as consumers spend more on aged bourbons and whiskeys. Bacardi, currently the fifth-largest spirits company in the U.S. by value, would jump to second place if the deal goes through.

“Adding Patrón to the Bacardi portfolio creates a tremendous opportunity for the brand outside of the United States as Bacardi’s international distribution network will help grow Patrón around the world, increasing scale in the U.S. and globally,” Madhavan said in a statement.

Keep those stops tight
Todd “Bubba” Horwitz

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.