An Italian Revenge

Davide Campari – Milano S.p.a., an iconic Italian beverage brand, had traced its origin and fortune in a common daily act widely spreads in Italy, well-known as aperitif.


The Group was founded in 1860 and nowadays is the world sixth-largest player in the premium spirits industry. During the early ‘90s, the rapid consolidation of the global drinks market, and especially the creation of a small number of dominant players, led Campari to make a choice between joining the race for market size or simply defending its core, but niche product. Thanks to the expansion period with the acquisition of a minority holding and world distribution rights, Gruppo Campari has grown steadily and today is considered one of the most thriving and international Italian company. It includes internationally renowned brands such as Aperol, Appleton Estate, Campari, SKYY and Wild Turkey.


Furthermore, on Tuesday, 15 March 2016, Campari has announced to launch a friendly takeover offer for Grand Marnier group in a deal that gives to the French distiller an equity value of €684m. The news came after Campari had reached an agreement with the controlling family shareholders of the French listed company Société des Produits Marnier Lapostolle (SPML), owner of Grand Marnier, to take full control of the company. The latest Campari transaction dated back to 2014, when it acquired 100% of Fratelli Averna, with a €103,75m operation.


No other company would have been better for a revenge against France, due to the numerous takeovers closed by French firms towards Italian enterprises, sharply increased during the last decade. Indeed, in the last years, Italy has been the target of well-known acquisitions. The sale period is identified just by analyzing the transactions related to Italian luxury brands, as reported by several KPMG M&As studies. In many case the “Bleus” were revealed to be the major buyers in terms of value, despite Chinese firms achieved the highest figure of takeovers.   
 

French press had an adverse reaction about this agreement because of they had to acknowledge that “a monument of French cultural and gastronomic heritage” will become an Italian ownership.
 

                                                                                 Number of deals in Italy – Main buyers for nationality

Let us take a closer look at details of this historic transaction. The Italian beverage giant will take immediate control of 17.19% of the SPML stock and in a second time a further 2.60%  (1.06% in bare ownership and 1.54% in usufruct of SPML’s capital) through block transactions with some of the controlling family shareholders, with an agreement for all remaining shares by 2021.

Moreover, Campari will also launch a tender offer at a price of 8.05 euros per share in cash. This price implies a 60.40% premium to the reference share price, based on SPML share price of € 5.02 (March 11, 2016). In addition an earn-out, related to the potential sale of the real estate property in St. Jean Cap Ferrat owned by SPML, is included.

Simultaneously to the acquisition of the initial stakes in SPML, Gruppo Campari has entered into an exclusive agreement with the target company for the worldwide distribution of the Grand Marnier spirits portfolio. The distribution agreement will become effective on July 1, 2016 and will remain in force until December 31, 2021, when it could be renewable for consecutive five-year periods.
 

 

However, the valuation of almost €684m attributed to Grand Marnier was described as “exorbitant, representing almost 5 times its assets, 4 times the revenue and 49 times profits”. In fact, It had a turnover of only €151m (fiscal year ending December 31, 201), of which € 129.5 million relating to sales of finished goods, and a consolidated EBITDA of € 30.8 million, not counting profits made by distributors. Although, it should be highlighted that 92% Grand Marnier’s sales are made outside France, with the United States accounting for about 60%, followed by Germany, Canada and France. The Group’s products are distributed in more than 150 countries via third-party distributors. An outstanding potential has been glimpsed by Campari management about this operation.


According to Gruppo Campari strategy, there are so much margin to get even better results, working on marketing and reputation of the French liqueur maker brand. Indeed, referring to Gruppo Campari CEO Bob Kunze-Concewitz claims, he said that ”this acquisition represents a perfect fit with our external growth strategy in terms of brand profile, distribution and financial framework”. Moreover, he added “In terms of route-to-market, Grand Marnier is a unique opportunity to continue leveraging our enhanced international distribution capabilities benefiting from a perfect fit of the distribution reach of the acquired business”. Full confidence in his words, given that this acquisition represents his 15th since 2007, when he joined Campari from Procter and Gamble.

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