On Heels of Almaden Agreement : British Spirits Firm to Buy Heublein, Pay $1.2 Billion
Grand Metropolitan of Britain will buy Heublein, RJR Nabisco’s wine and spirits subsidiary, for about $1.2 billion cash, the companies said Friday.
The purchase of Farmington, Conn.-based Heublein, which controls about 11% of the U.S. alcoholic-beverage market, will make Grand Metropolitan one of the world’s largest marketers of spirits and wines.
California’s sprawling Almaden Vineyards, which Heublein this month agreed in principle to buy from National Distillers & Chemical Corp., is expected to be part of the sales agreement by the time the transaction is completed in March, the companies said. A Heublein spokesman said Heublein’s purchase of Almaden and the agreement of Grand Metropolitan to buy Heublein, which sold 8.3 million cases of wines last year, were “more coincidental than anything else.”
The deal is subject to approval by London-based Grand Metropolitan’s shareholders and by federal government agencies.
RJR Nabisco said the sale will “substantially strengthen” its balance sheet, which took on a heavy load of debt in 1985 when R. J. Reynolds Industries acquired Nabisco Brands for $4.9 billion. Last October, the renamed RJR Nabisco sold its Kentucky Fried Chicken unit to Pepsico for $840 million.
Selling Heublein, it said, will also “strengthen the focus” of the consumer-products giant on its tobacco, food and packaging operations. “With the sale of Heublein, we have accomplished the final major step in this restructuring process,” said F. Ross Johnson, president and chief executive of RJR Nabisco.
Sir Stanley Grinstead, Grand Metropolitan’s chairman, called Heublein’s purchase “very exciting.” Grand Metropolitan has worldwide interests in spirits and wines, through its International Distillers and Vintners subsidiary, and in hotels, brewing and consumer services. Its major products include J&B; Scotch, Bailey’s Original Irish Cream, Sambuca Romana, Gilbey’s gin and Bombay gin.
Heublein and International Distillers & Vintners have had joint marketing agreements since 1953, the companies said. For example, IDV handles Smirnoff vodka for Heublein in many foreign markets, and Heublein markets IDV’s Black Velvet Canadian whisky in this country. Other major Heublein brands are Vat 69 Scotch, Old Grand Dad bourbon, DeKuyper cordials, plus Beaulieu Vineyards and Inglenook wine operations in the Napa Valley.
“We have been discussing for some time possible business arrangements between Heublein and IDV,” Grinstead said in a statement released by RJR Nabisco in Winston-Salem, N.C., “and this purchase is a natural outcome. The acquisition is in line with Grand Metropolitan’s strategy of developing its core businesses and increasing the international content of its earnings.”
That statement and the proximity of Heublein’s purchase to its announced acquisition of Almaden Vineyards suggested to some industry observers that Heublein may have acted on behalf of Grand Metropolitan.
“Heublein may have been a stalking horse if not a Trojan horse,” suggested Paul Gillette, publisher of Los Angeles-based Wine Investor. Grand Metropolitan, he explained, may have reasoned that Almaden’s purchase price, which was not disclosed, might have been higher had National Distillers known Grand Metropolitan was behind it.
In any case, Gillette said, Almaden enhances Heublein’s acquisition for the British firm.
Eileen Fredrikson, a partner in the San Francisco wine consulting firm of Gomberg-Fredrikson Associates, said news of the sale “came out of nowhere. It was quite shocking.” On the other hand, she added, Grand Metropolitan has a reputation of being “a good parent and letting its managers manage, so our reaction is surprise but not dismay.”
According to Beverage Media, a trade journal, 23 major alcoholic-beverage firms have changed hands in the last year with a total price tag of $6.7 billion. About half the sales involved acquisitions by foreign companies, mostly British, said Publisher Bill Slone.
