Bacardi is making plans to acquire Patron Spirits International for a $5.1 billion deal following Pernod Ricard’s buy out of Avion Tequila and Diageo’s acquisition of George Clooney’s Casamigos tequila for up to $1 billion. Patron’s operating earnings is expected to reach a price at about 25.5 times with sales reaching 7.5 times. This marks a well below estimated 20 times sales that Diageo purchased Casamigos for. However, Patron predicts sales of about $675 million per year compared to $50 million for Casamigos.
U.S. tequila sales are growing quicker than the overall alcoholic drinks market as high end brands help tequila move away from the party drink image. Bacardi’s recently appointed chief executive, Mahesh Madhavan has intentions of growing in North America in higher growth premium brands and expanding Patron distribution globally. Back in 2016, global tequila sales surged 5.2% while the overall alcohol drinks market dropped 1.3%. As consumers look into more expensive drinks, premium brands have been outselling mass market labels. The Bacardi and Patron deal is expected to be finalized in the first half of this year.