HIGHLIGHTS

• Agreement reached with holders of 81.4% stake in Jamaican company Lascelles deMercado & Co. Limited (‘LdM’). At closing the entity will primarily consist of LdM’s spirits business

• Campari’s acquisition will be made through a formal tender offer to the LdM board and public shareholders to acquire all outstanding ordinary and preference shares pursuant to the Jamaican Takeover Code and applicable requirements

• Gruppo Campari (the ‘Group’ or ‘Campari’) enters the large and attractive rum category, adding a portfolio of leading premium brands with a unique and distinctive Jamaican heritage

• The acquisition entails the award winning Appleton Estate, Appleton Special / White, Wray & Nephew and Coruba brands as well as substantial ageing inventory to support future expansion

• Campari enhances its critical mass in key Americas markets – including the US, Canada, Mexico, the Caribbean, and acquires a leading market position in Jamaica, creating the foundations for future international growth

• This transaction further boosts Campari’s internationalisation, significantly growing the business outside of Italy, whilst strengthening its largest and most profitable business, the Spirits segment

• Total purchase price for 100% of LdM’s share capital isUSD 414,754,200 (or approximately € 330 million at current exchange rate) on a cash free / debt free basis. The deal is EPS accretive in year 1

• Third largest acquisition in Campari’s history following the successful acquisitions of Wild Turkey and Skyy Spirits

• Campari continues to leverage its acquisition framework in a very disciplined and consistent manner for future growth

• Completion of the CLF stake acquisition and formal tender offer is expected in Q4 2012

Milan, September 3, 2012, PR Newswire/ – Gruppo Campari announces it has signed an agreement (the ‘Agreement’) with members of the CL Financial Limited group of companies (‘CLF’) to acquire an 81.4% ownership in Lascelles deMercado & Co. Limited (‘LdM’), a publicly traded holding company, based in Kingston, Jamaica.

Campari’s acquisition will be made through a formal tender offer to the LdM board and public shareholders to acquire all outstanding ordinary and preference shares pursuant to the Jamaican Takeover Code and applicable requirements.

Pursuant to the Agreement, at the time of closing, LdM will comprise the Spirits business, led by a world-renowned, leading Jamaican rum range, including Appleton Estate, Appleton Special / White, Wray & Nephew and Coruba, the related upstream supply chain, as well as its successful local consumer products distribution business (the ‘Acquired Business’).

This transaction marks the third largest acquisition in Campari’s history and positions the Group as a leading producer of premium rum globally.

Bob Kunze-Concewitz, Chief Executive Officer: ‘With Lascelles deMercado, the award winning distiller of world class premium dark,overproof and gold Jamaican rums, we are once again leveraging our acquisition framework in a very disciplined and consistent manner for future growth. The addition of the Appleton, Wray & Nephew and Coruba rum brands as well as a portfolio of local Jamaican brands will help us build our critical mass further in key North American markets, provide a leading market position in Jamaica, a major destination in the Caribbean, whilst laying the foundations for future international growth across all major usage occasions of the growing and premiumising rum category. When completed, this acquisition will give a further boost to the internationalisation of Gruppo Campari, further expanding our business outside of Italy, as well as strengthening our largest and most profitable business, the Spirits segment.’

The Acquired Business includes an unrivalled Portfolio of world-class premium and overproof rums, includingAppleton Estate (super premium aged rum designed for sipping),Appleton Special and White (blend specially designed for mixing), Wray & Nephew White Overproof (the world’s top selling award-winning overproof rum), Coruba and a strong portfolio of local brands. In Fiscal Year ended September 30, 2011, the rum and spirits portfolio achieved total sales volume of3.5 million 9 litre cases.

Upstream supply chain operations consist of agriculture facilities, including sugar cane fields, two distilleries, one sugar factory, nine farms and 18 warehouses, all located in Jamaica, as well as a complete and deep inventory of aged rum to support the global expansion of the Acquired Business. The Acquired Business also includes local merchandising operations focused on the warehousing, sales, marketing and distribution of a wide range of third party branded products from well-known consumer goods companies.

All other LdM assets that are not in the scope of the Acquired Business (principally LdM’s insurance business, Globe, its transportation assets, as well as securities in other companies)are currently involved in a process of divestment and consequently will not form part of the Acquired Business.All net proceeds will be paid to LdM’s current shareholders by the way of one-time extraordinary dividend(s).

The completion of the acquisition of CLF’s stake in LdM and the formal tender offer process are subject to various closing conditions and are expected to occur in the fourth quarter of 2012.

In the full year ended September 30, 2011, the Acquired Business achieved total pro-forma sales of USD 265.4 million (or € 190.7 million at the average exchange rate for the period) and a pro-forma EBITDA of USD 24.2 million (or € 17.4 million). In the last twelve months ending June 30, 2012 (‘LTM’) the Acquired Business achieved total pro-forma sales of USD 277.0 million (or € 207.6 million) and a pro-forma EBITDA of 27.7 million (or € 20.7 million).

The total purchase price for 100% of LdM’s share capital isUSD 414,754,200 (or approximately € 330 million at current exchange rate) on a cash free / debt free basis, which corresponds to a price per ordinary share of USD 4.32 and price per preference share of USD 0.57. This corresponds to a historic multiple of 15 times the LTM (June 2012) EBITDA, excluding any potential synergies. The consideration will be paid for in cash. Campari’s pro forma Net debt / LTM EBITDA ratio will become 2.7 times, calculated on the basis of closing and payment of USD 414,754,200 on June 30, 2012.

Through the acquisition of LdM, Campari enters the attractive and growing rum category, which combines tradition, heritage and authenticity with dynamism and vibrancy. Today the rum category is expanding significantly withpremiumisation, innovation and a broad international appeal, raising consumers demand for aged, spiced and high-proof rums all over the world.

Campari will develop its critical mass in key international Appleton markets – the US, Canada, Mexico, and acquire aleading franchise in Jamaica, creating the foundations forfuture international growth. It will also leverage its strong distribution capabilities, enhanced following the Group’s recent investment in its route-to-market.

This acquisition is a significant step in the development of Campari into a leading spirits player. It positions the Group to exploit the dynamism of key global consumption trends andfurther boosts its internationalisation, significantly growing the business outside of Italy as well as strengthening its largest and most profitable business, the Spirits segment.

Bank of America Merrill Lynch acted as financial advisor to Campari on this transaction. Morrison & Foerster acted as legal advisors.
The transaction will be fully financed through credit facilities underwritten by three relationship banks, namely Banc of America Securities, Banca Intesa and Deutsche Bank.

ABOUT GRUPPO CAMPARI

Davide Campari-Milano S.p.A., together with its affiliates (‘Gruppo Campari’), is a major player in the global beverage sector, trading in over 190 nations around the world with a leading position in the Italian and Brazilian markets and a strong presence in the USAand Continental Europe. The Group has an extensive portfolio that spans three business segments: spirits, wines and soft drinks. In the spirits segment its internationally renowned brands, such as Campari, Carolans, SKYY Vodka and Wild Turkey stand out. It also has leading regional brands including Aperol, Cabo Wabo, Campari Soda, Cynar, Frangelico, Glen Grant, Ouzo 12, X-Rated Fusion Liqueur, Zedda Piras and the local Brazilian brands Dreher, Old Eight and Drury’s. Its wine segment boasts the global brand Cinzano, as well as important regional brands including Liebfraumilch, Mondoro, Odessa, Riccadonna, Sella&Mosca and Teruzzi&Puthod. The soft drinks segment comprises the non-alcoholic aperitif Crodino and Lemonsoda as well as its respective line extension dominating the Italian market. The Group employs over 2,300 people. The shares of the parent company, Davide Campari-Milano S.p.A. (Reuters CPRI.MI – Bloomberg CPR IM), are listed on the Italian Stock Exchange. www.camparigroup.com

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(Reuters) – Italy’s Gruppo Campari (CPRI.MI), maker of the eponymous red aperitif, is buying Jamaican rum maker Lascelles de Mercado & Co LAS.JS to boost its presence in growing American markets, as sales in recession-hit Italy lose fizz.

Campari, also owner of Glen Grant whisky, said it agreed to buy an 81.4 percent stake from ailing Caribbean state-owned conglomerate CL Financial, valuing the target at $414.8 million, or around 330 million euros, making it Campari’s third-biggest acquisition behind Skyy vodka and WildTurkey bourbon.

Campari, which is also making a $4.32 per share offer to remaining minority shareholders, is aiming to expand in a rum market whose volumes have grown for 10 consecutive years. The United States is the largest rum market in terms of sales, with 35 percent of global premium rum volumes, Campari said.

The strategy echoes that of bigger groups like Diageo (DGE.L) and Pernod Ricard (PERP.PA), which have been upbeat as strong international markets compensate for Europe. Diageo for instance raised its dividend last month, confident that buoyant demand for whisky and spirits in Asia and Africa would help it hit medium-term targets.

CL Financial grew from its insurance company roots to be one of the biggest conglomerates in the Caribbean region. But in 2009 the government of Trinidad and Tobago took over the management of the company, whose liquidity troubles during the financial crisis sent economic shock waves across the Caribbean.

Lascelles makes the Appleton Estate, Appleton Special/White, Wray & Nephew and Coruba brands.

The acquisition, whose completion is expected by the fourth quarter of 2012, would boost Campari’s earnings per share in the first year of the deal, the group said. Chief Executive Bob Kunze-Concewitz also said it would strengthen the group’s spirits operations, its largest and most profitable business.

Campari shares were up 5.5 percent at 5.765 euros by 1016 GMT, having risen as high as 5.805 euros, their highest since November 2011 and outperforming a flat European food and beverage sector .SX3P.

“We expect a positive stock reaction on the back of the very positive track record of integration and value creation as experienced in the past big acquisition in Campari’s history,” Mediobanca said in a note, raising its rating on the stock to “outperform” from “neutral”.

SALES GROWTH

Campari has historically grown through acquisitions and is targeting underlying sales growth of 5 percent per year over the next five years, as it expands in fast-growing emerging markets to offset weaker demand in Europe.

The group’s organic or underlying sales in Italy, which accounts for nearly a third of group sales, fell 1.6 percent in the fourth quarter of 2011.

Mediobanca estimated the acquisition would translate to a boost of around 1.5 euros in its “fair value” estimate for Campari’s shares, compared with its previous estimate of 5.37 euros.

Campari said it would fund the deal through credit facilities underwritten by Banc of America Securities, Banca Intesa (ISP.MI) and Deutsche Bank (DBKGn.DE). The financing pays an average spread of 265 basis points (bps) over Euribor and Campari will decide whether to term out or refinance a portion of the acquisition financing in 2012 and 2013.

The company said the offer price corresponded to a multiple of 15 times June 2012 earnings before interest, tax, depreciation and amortisation, excluding possible synergies.

The company said it expected the multiple to fall to 10 times in two to three years’ time. “This would mean roughly $13 million of incremental profits, which we expect will be recognized mainly at gross margin level,” CFO Paolo Marchesini said during a conference call with analysts.

One analyst, who asked not to be named, said the deal had a strong strategic rationale and was financially sound. “After the deal, net debt/EBITDA ratio is estimated at 2.7, which does not stretch the balance sheet too much,” the analyst added.

Kunze-Concewitz told Reuters in March he could spend up to 600 to 700 million euro on acquisitions as the group’s debts fell to 637 million euros or 1.9 times EBITDA (earnings before interest, tax, depreciation and amortisation).

Campari spent a total of 31.5 million euros last year to buy Russian distributor Vasco and Brazilian brand Sagatiba in a relatively quiet year for deal-making compared with a recent buying history which included Cinzano in 1999, Skyy in 2001, Glen Grant in 2005, and its biggest-ever acquisition, of Wild Turkey bourbon, in 2009 for $575 million.

(Additional reporting by Jennifer Clark, Francesca Landini and Alasdair Reilly; Editing by Helen Massy-Beresford and David Holmes)

http://www.reuters.com/article/2012/09/03/us-campari-idUSBRE88202Y20120903