Diageo DEO 1.14% PLC has agreed to pay as much as $610 million to acquire Aviation American Gin, which is partly owned and pitched by actor Ryan Reynolds, and other brands in its latest bet on a celebrity-backed premium liquor.
The world’s largest liquor maker said it would make an initial payment of $335 million and a further potential consideration of as much as $275 million based on performance over 10 years. The deal is expected to close by the end of the year.
Diageo is buying Davos Brands LLC, a New York-based distributor and producer of Aviation American Gin and other liquors. Mr. Reynolds, who bought an undisclosed stake in Aviation in 2018, will retain a continuing interest in the brand after the deal, the companies said.
Mr. Reynolds, a Hollywood star best known for his leading role in “Deadpool” superhero films, has appeared in the brand’s advertising. The gin is produced at a craft distillery in Portland, Ore.
Aviation’s U.S. sales rose from about $20 million in 2018 to about $40 million in 2019, or 1.3% of the U.S. gin market, according to data from Euromonitor.
Jefferies estimates the brand sold about 96,000 cases last year. Analyst Edward Mundy says the brand has been growing rapidly, but Diageo is paying a high multiple of sales.
“Whilst we recognise that Aviation provides a new growth engine for the key U.S. market, we would have preferred to see investment into a category with higher barriers to entry than gin,” Mr. Mundy wrote in a research report.
U.K.-based Diaego, maker of Johnnie Walker Scotch, Smirnoff vodka and many other brands, has a long history betting on pairing up with celebrities to push premium drinks.
In 2007, Diageo teamed up with Sean “Diddy” Combs on Ciroc vodka. In 2017, Diageo agreed to pay as much as $700 million to buy upscale tequila brand Casamigos, which was co-founded by actor George Clooney.
“The acquisition of Aviation American Gin and the Davos Brands portfolio is in line with our strategy to acquire high-growth brands with attractive margins that support premiumization,” Diageo Chief Executive Ivan Menezes said.
Along with Aviation, Diageo will acquire the other brands in the Davos Brands portfolio, including Astral Tequila, Sombra Mezcal and TYKU Sake.
Write to Jennifer Maloney at [email protected]
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