Whisky Focus - Remy Cointreau In Talks To Buy Bruichladdich Distillery

French spirits group Remy Cointreau is in exclusive talks to buy Scottish whisky maker Bruichladdich Distillery as it looks to tap booming demand for premium whisky from emerging markets in Asia.

Remy Cointreau, the maker of Remy Martin cognac, Cointreau Liqueur and Mount Gay Rum, sold its champagne division last year and had since been looking for a premium whisky or brand to complement its portfolio.

Bruichladdich, a distiller of single-malt Scotch whisky based on the Isle of Islay, generates annual sales of around 15 million euros ($18.5 million), a Remy Cointreau spokeswoman said on Monday.

She would not provide further financial details but said the company, though small, had "strong growth potential" and would benefit from Remy's distribution network, particularly in Asia, where demand for premium whisky is rising.

As drinkers worldwide acquire a growing taste for whisky, spirits giants are all stepping up investment in the sector.

Last month, Diageo Plc, the largest producer of Scotch whisky, said it was investing more than 1 billion pounds ($1.55 billion) in the drink over the next five years, while the world's second-biggest Scotch producer, Pernod Ricard, unveiled a 40 million pound investment in May at its malt distilleries to boost supplies of its top sellers like Ballantine's and Chivas Regal.

Bernstein analysts said in a note they saw "a lot of strategic upside for Remy Cointreau in the deal", citing "instant incremental profit from putting Bruichladdich through Remy Cointreau's distribution network" and "significant revenue synergies from the extra reach that Remy Cointreau would bring".

"However, it is difficult to see Bruichladdich making a huge difference to Remy Cointreau's bottom line," they added. "Bruichladdich's 2011 sales of 8.7 million pounds would equate to approximately 1 percent of group turnover" in 2012.

At 0833 GMT, Remy Cointreau shares were off 0.86 percent at 88.65 euros, underperforming the European sector.

The distillery was built in 1881, mothballed by Jim Beam in 1995 and restarted by the current management team in 2001.

It comes under the umbrella of specialist malt distillers Murray McDavid, who bought Bruichladdich in 2000 for 6.5 million pounds, and it is run by Managing Director Mark Reynier.

Remy Cointreau said in June it was confident of generating "steady and profitable growth" because of strong demand from Asian consumers.

Chief Executive Jean Marie Laborde said the company - which recently paid a special dividend to shareholders on the back of strong profit - had a billion euros for acquisitions and was on the lookout for one or several brands.

Bernstein analysts said the purchase of Bruichladdich would only use a fraction of Remy's war chest, as even applying a "generous" valuation of 20 times earnings before interest, tax, depreciation and amortisation (EBITDA) would give a price of about 43 million euros.

Thanks to the sale of its champagne business, Remy ended fiscal year 2011-12 with net det of 188.6 million euros. ($1 = 0.8126 euros) ($1 = 0.6449 British pounds) (Reporting by Nina Sovich and Dominique Vidalon; Editing by Dan Lalor and Jon Loades-Carter.
 

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