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Summary
- CMA will be probing into the acquisition of Chase Distillery Limited by Diageo Plc
- The market regulator is expected to announce the Phase -I decision of the probe by 4 March.
- Diageo Plc had recently completed the acquisition of actor Ryan Reynolds-funded firm Aviation American Gin
The Competition and Markets Authority (CMA), which is the apex authority in the UK that promotes healthy competition, has said on Friday that it would be probing into the acquisition deal of Chase Distillery Limited by UK-based Wine and spirits producer Diageo Plc (LON: DGE).
The primary objective of the probe is to check if the acquisition will lower the competition within the sector. The CMA is expected to announce the Phase -I decision by 4 March.
Also read: Diageo Announces Acquisition of Aviation American Gin
If the deal between Diageo and Chase Distillery is fair, this will probably lead to the creation of a merger that would be formed under the merger provisions of the Enterprise Act 2002. Therefore, if any party feels that the merger can cause a substantial lowering of competition within the sector, it is free to comment on this transaction till 21 January and can also assist CMA with the probe.
In October last year, Diageo Plc agreed to acquire Herefordshire-based Chase Distillery for an undisclosed amount. Formed in 2008, the single estate distillery’s portfolio included gins, vodkas, and elderflower liqueur. The Chase Original Potato Vodka and the Chase GB Gin are well-known brands.
Diageo’s intention to acquire Chase Distillery was to expand its range in the premium plus gin segment, and it was planning to tap the growth opportunities by developing Chase’s portfolio further. The transaction was expected to occur in early 2021, though it was subjected to regulatory approvals.
The demand for the premium gin segment has grown leaps and bounds in recent times. Between 2014 and 2019, the UK’s total gin category has recorded a compound annual growth rate of 40 per cent, according to industry experts.
Notably, in a deal worth $610 million, Diageo had lately completed the acquisition of actor Ryan Reynolds-backed Aviation American Gin. Shares of Diageo Plc were up 1.57 per cent at GBX 3,036 from the previous day’s price close on 8 January 2021 at GMT 1:00 PM+1. In the last six months, shares of Diageo delivered a price return of 12.40 per cent.
The Covid-19 outbreak posed significant challenges for Diageo’s business, impacting the full-year performance. The reported net sales were down by 8.7 per cent during the FY2020. However, the full-year dividend was up by 2 per cent to 69.88p per share.
