Diageo to acquire Brazilian rum brand

Drinks giant Diageo is set to buy Ypioca, one of Brazil's largest cachaca brands in Brazil, the company announced on Monday.

Diageo, which already owns well-known brands such as Smirnoff and Guiness, said it has reached an agreement with Ypioca Agroindustrial Limitada to purchase its white rum brand for 900m Brazilian real, or £300m, in cash.

Cachaca is the largest spirits category in Brazil and Ypioca is number two by value and number three by volume. The business had net sales of BRL 177m (£60m) in 2011.

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"Brazil is an attractive, fast growing market for Diageo with favourable demographics and increasing disposable incomes. The acquisition of Ypioca gives us the leading premium brand in the largest local spirits category. It will also provide Diageo with an enhanced platform from which to accelerate the long term growth of our premium international spirits brands in Brazil," said Diageo's Chief Executive Officer Paul Walsh.

"This investment represents the continuation of our strategy to increase Diageo's presence in the fastest growing economies of the world," he said.

The acquisition is expected to earnings per share neutral in the first year and economic profit positive by year five.

BC