Diageo enters Ketel One partnership

Diageo, the world’s leading premium drinks business, and the Nolet family have agreed to form a new 50/50 company, which will own the perpetual exclusive global rights to sell, market and distribute the successful super-premium Ketel One vodka.

Diageo has agreed to pay US$900 million for its 50% equity interest in the newly formed company, which will be based in the Netherlands, with the Nolet family owning the other 50%.

Due to its rights under the agreements Diageo will fully consolidate the financial results of the new company accounting for the Nolet holding as a minority interest.

Profits from the sales, marketing and distribution operations will be shared broadly equally.

The Nolet family will continue to own the brand rights for Ketel One and Diageo will become the exclusive distributor of the brand globally.

Ownership of the Nolet distillery in Schiedam in Holland, where they have been distilling since 1691 and where Ketel One vodka is manufactured will remain with the Nolet family.

The distillery will supply Ketel One vodka exclusively and perpetually to the new company at an agreed rate of return.

Currently, Ketel One vodka has an annual volume of 1.9 million cases.

It is primarily a North American brand in the super-premium vodka segment and will complement Diageo’s premium Smirnoff and its ultra-premium Cîroc brands.

Similarly outside the US Ketel One will expand Diageo’s brand range of vodka.

The Nolet family and Diageo believe that this new relationship will accelerate the growth of the brand in the USA and elsewhere in the world.

The transaction is expected to close by 31 March 2008, subject to the required regulatory approvals and other conditions.

Diageo expects that the transaction will be EPS neutral in the first full financial year after closing and will be economic profit positive in year five using a weighted average cost of capital of 9%.

Paul Walsh, Chief Executive, Diageo, said “This transaction is strategically important for Diageo, giving us an interest in an outstanding high quality brand and fantastic potential for global growth in the super-premium vodka segment”.


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