Bacardi beat off more than 20 rivals to win an auction for the two brands and the final price smashed City forecasts. Diageo stands to make a profit of pounds 460m on the deal.
Dewar's and Bombay made profits of pounds 95m last year, after a combined marketing spend of around pounds 70m. The deal satisfies Bacardi's craving for a leading whisky brand to go alongside its white rum, which is the biggest selling brand in the world, and furthers its ambition to become a major force in the drinks industry. It also gives the group the chance to develop Bombay Sapphire, one of the most exciting of the new spirits brands, around the world.
About pounds 500m of the sale proceeds have already been earmarked to help pay the pounds 2.9bn special dividend Diageo announced last year. The rest of the money will go to pay off some of the group's debts. However analysts believe that the bumper sales price is likely to lead to bring forward plans to make further returns to shareholders via a share buy back or another special dividend.
Diageo was formed last December when Guinness and Grand Metropolitan merged to create the largest drinks combine in the world. It was forced to sell the brands by June to get the green light for the blockbuster deal from the US and European and competition authorities. Bacardi's acquisition will safeguard the future of Dewar's four distilleries in Scotland.
The acquisition of Dewar's is a big strategic move for Bacardi, which had annual sales of $2.7bn (pounds 1.6bn) and made pre-tax profits of $234m in the 64 weeks to March 1997. George B. Reid Jr, Bacardi's president and chief executive, said: "In an industry that is consolidating rapidly to a few, very powerful players, it became clear to us that Bacardi had a unique opportunity to acquire two world-class brands."
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