Bacardi To Buy Patron Tequila for $5.1 Billion

Jan. 23, 2018
The global rum giant will pay a premium price to get into increasingly crowded premium tequila market.

Bacardi Ltd., best known for its namesake rum, has reportedly held a 30-percent stake in Patrón Spirits International AG for nearly a decade. Bacardi is now buying the rest, with plans to distribute the Mexican-made liquor more widely and cash in on demand for high-end tequila.

As rivals scramble to own more top-shelf spirits, the company said on Jan. 22 it was hoping to become the second largest spirits company in the U.S. in market share by value. The $5.1-billion purchase is one of the biggest liquor acquisitions in years. 

As part of that effort, producers have tried to transform tequila from an inexpensive party drink to a more refined spirit, comparable to a single-malt Scotch.

Patrón, an early entrant in the premium tequila market, is now the industry’s leader, with U.S. sales of $1.6 billion in 2016, according to Euromonitor. But it faces mounting competition from several brands, including ones backed by celebrities such as George Clooney and Justin Timberlake.

U.S. volumes of super-premium tequila jumped more than 700 percent from 2002 to 2016, compared with a 121-percent rise in all tequila volumes over the same period, according to the Distilled Spirits Council.

Based in Schaffhausen, Switzerland, Patrón, produces more than three million cases, or 36 million bottles, each year, while Casamigos was expected to produce about 170,000 cases last year. In addition to its namesake tequila, Patrón owns Pyrat rum and distributes Ultimat vodka.

While Patrón has bottles that sell for $45, others sell for hundreds of dollars, and some limited editions cost thousands. Patrón was founded in 1989 by billionaire John Paul DeJoria, the same entrepreneur who co-founded John Paul Mitchell Systems hair products.

After the deal, Patrón’s existing leadership, including CEO Edward Brown, is expected to continue overseeing the business. DeJoria is expected to continue to be an ambassador for the brand as a chairman emeritus. As part of the purchase, DeJoria will sell his 70 percent stake in the company. Bacardi’s purchase price includes the assumption of Patrón’s debt (not publicly disclosed).

The transaction is expected to close in the first half of 2018. The deal will allow Bacardi, based in Bermuda, to add an additional brand-name liquor to a roster that already includes Grey Goose vodka, Dewar’s Scotch whiskey and a fleet of eponymous rums. Bacardi has seen demand for its beverage slip in recent years as consumer tastes have trended away from rum, vodka and beer toward more refined whiskeys and tequilas. By acquiring Patron, Bacardi not only climbs to a top spot in the super-premium spirit category, it also takes control of an in-demand beverage.

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