Bacardi buys Patron tequila

Tequila remains in demand. Bacardi has agreed to buy out Patron Spirits International in a deal valuing the high-end tequila maker at USD 5.1 billion. Bacardi, the world’s largest private spirits business, already owns 30 percent of Patron, which it purchased in 2008 from businessman founder John Paul DeJoria, 73, who is equally famous for co-founding the shampoo company John Paul Mitchell Systems.

The deal was announced on 22 January 2018 and came days after Pernod Ricard bought out Avion Tequila and months after Diageo bought George Clooney’s Casamigos tequila for up to USD one billion.

Jefferies analysts put the price at about 25.5 times Patron’s estimated operating earnings and 7.5 times its sales. That is well below the estimated 20 times sales that Diageo paid for Casamigos, but Patron is a much more mature business, with estimated sales of about USD 675 million per year, versus only about USD 50 million for Casamigos.

Patron, founded more than 25 years ago, was a high-end pioneer, but now competes with a range of brands including Avion, Diageo’s Don Julio and Brown-Forman’s Herradura.

Tequila sales, still largely confined to North America, are growing faster than the overall alcoholic drinks market. Global tequila sales rose 5.2 percent in 2016, according to research firm IWSR, while the overall market for alcoholic drinks fell 1.3 percent.

Bermuda-based Bacardi was founded in Cuba in 1862, selling its namesake rum. It now owns some 200 brands, including Bombay Sapphire gin and Grey Goose vodka.

The deal is expected to close in the first half of 2018.