Drinks giant Diageo agrees sale of wine businesses

Johnnie Walker and Guinness owner Diageo has agreed a 552million US dollar (£360.5m) deal to sell its main wine businesses, including the Blossom Hill and Piat d’Or labels.

The drinks gaint, which also brands includiing Bell’s and Smirnoff, is selling its UK wine arm Percy Fox and US-based Chateau and Estate Wines to Australian giant Treasury Wine Estates, the group behind names such as Penfolds and Wolf Blass.

The deal sees Diageo largely pull out of the wine market. Ivan Menezes, chief executive, said: “Wine is no longer core to Diageo and this sale gives us greater focus.”

Treasury Wine said that the acquisition of Chateua and Esate Wines would “transform” its presence in the US.

Diageo said it would make £300m net from the wine sale, which it plans to use to pay down company debts. It means the group will have freed-up £1billion from the sale of assets since the start of the year.

It leaves Diageo with a minimal interest in wine, including Justerini & Brooks Wine Merchants, the Argentinian wine business of Navarro Correas, Mey Icki and USL wine brands and the Acacia winery and vineyard.

FTSE 100-listed Diageo, which operates in 180 countries, has pinned its growth on an expanding middle class in emerging markets in Latin America and Asia who could afford its premium brands such as Johnnie Walker, Captain Morgan and Tanqueray.

In recent years, however, the global slowdown has pegged back the firm’s growth and the strong pound and currency movements have given it an added headache in recent months, with the group warning in September this would knock its profits by a bigger-than-expected £150m this year.