Diageo sells off Cinzano for pounds 165m

DIAGEO, the UK-based burgers to brandy group, yesterday sold its Cinzano vermouth brand, famously advertised by Joan Collins and the late Leonard Rossiter, to Italy's Campari, a privately owned drinks company, in a deal thought to be worth about pounds 165m.

The disposal is the last in a series of auctions initiated by Diageo in April to sell off four European spirits. The group said yesterday it expected to record a pre-tax exceptional charge on disposal of pounds 240m, which analysts say indicates that the four brands, sold over the last week, were carrying a book value of almost double market worth. The net proceeds from the four sales are about pounds 255m.

Jack Keenan, chief executive of Diageo's United Distillers & Vintners division, said: "These disposals support UDV's strategy of focusing on our priority brands and securing the long term development of these four European brands."

Diageo said the exceptional charge related to transaction costs, liabilities which have been retained and pounds 222m of goodwill that was written off in the late Eighties and early Nineties when the company acquired the brands. The pounds 240m is expected to be charged against the current fiscal year. Analysts emphasised that it was an accountancy loss only and would have little impact on profits.

Cinzano is the number two brand in the global vermouth sector after Bacardi's Martini. Diageo will retain its production facilities at Santa Vittoria in Italy and San Juan in Argentina where it currently produces Cinzano. The group will continue to produce the drink at the two sites on behalf of Campari for an agreed period.

On Tuesday, Diageo announced that it will sell its Metaxa and Asbach brandies to Bols distillers, a smaller Dutch rival owned by CVC Capital Partners. Asbach is the leading brandy in the German market and Metaxa is the world's number one selling Greek spirit.

Last week the UK group agreed to sell its Vecchia Romagna brand to Montenegro, another privately owned Italian spirits group.

Diageo's remaining spirits brands include three scotch whiskies; Johnnie Walker Red and Black, and J&B, Gordon's and Tanqueray gins, Smirnoff vodka, Baileys and Malibu liqueurs and Jose Cuervo tequila.

The four brands have combined annual volumes of 6.4m nine-litre cases. Cinzano accounts for about 70 per cent of that amount. In the year ended 30 June 1999 contribution after marketing expenditure for the four brands was pounds 52m.