Campari in red at Piazza Affari after the acquisition of Napoleon's cognac. The stock is currently losing 2% to 10,095 euros after having reached a low of 9,702 euros at the opening.
The sales were triggered after the company announced last night that it had started exclusive negotiations with Beam Suntory to acquire 100% of Courvoisier, among the top four historic houses of premium cognac. The operation is expected to be worth around 1,1 billion euros.
Campari and the acquisition of Courvoisier
It is the largest transaction by value in the history of Campari, which allows the company significant expansion in the United States and growth prospects in Asia. In addition to the purchase price (1,1 billion euros, 1,2 billion dollars) a additional payment of a maximum of 0,12 million dollars (0,11 million euros) payable in 2029 based on the achievement of net sales objectives achieved in the 2028 financial year. The corresponding enterprise value is equal to 1,32 billion dollars (1,22. 17 billion euros) equivalent to a multiple of approximately 2022 times the contribution margin for the 2024 financial year. The transaction is expected to close in XNUMX.
Courvoisier is a historic brand, founded in 1828 by Félix Courvoisier in Jarnac in the Charente region of France. Courvoisier is also the most recent and most awarded of the “big four” historic cognac houses and received the title of Official Supplier of the Emperor's Household from Napoleon III, supplied the royal courts of Europe and was the favorite drink of the Belle Epoque, chosen to celebrate the inauguration of the Eiffel Tower and the opening of the Moulin Rouge.
In the conference call with analysts, Campari CEO Bob Kunze-Concewitz said the deal should boost Campari's net sales by about 9% and earnings per share by 2%, although it will initially weigh on profit margin gross of the group.
However, it could scare investors the debt. The company has in fact obtained a 1,2 billion euro bridge loan from a group of banks with a maximum duration of 24 months and said it will monitor the markets for financing alternatives.
Following the acquisition, and assuming a fully debt-financed transaction, Campari expects pro forma Net debt/EBITDA-adjusted to increase from 2,6x at 30 September 2023 to approximately 4x at closing. Subsequently, a sustained reduction in debt is expected, “fueled by the generation of positive cash flows”.
“We are excited to acquire uone of the first four historic cognac houses, Courvoisier, with significant potential and very renowned expressions. Adding Courvoisier to our portfolio of global priorities constitutes a unique and rare opportunity to expand our premium spirits portfolio and our premium spirits and cognac offering,” said Bob Kunze-Concewitz, CEO of Campari Group.
Courvoisier numbers
In the fiscal year to December 31, 2022, the Courvoisier business, which also includes the Salignac brand, achieved net sales of $249 million, with a contribution margin, i.e. the gross margin after advertising and promotion expenses, of 78 million dollars. In the ten months to 31 October 2023, net sales amounted to 148 million, down 33% compared to the same period in 2022, and the contribution margin amounted to 37 million.
The acquired business includes an excellent stock of maturing eaux-de-vie, with a book value of approximately 365 million as of 31 October 2023, well-balanced aging profiles to support the future development of the brand.
The (very positive) opinion of the analysts
Despite investors' doubts, analysts promote the operation. The agreement with Courvoisier “makes strategic sense for Campari in terms of brands, premium positioning and distribution. It is not cheap, but it has strong growth potential within the group,” the experts point out Banca Akros.
For analysts of Equity, is “an important strategic opportunity” and with “a strong strategic rationale as with this Campari operation strengthen your portfolio with a premium brand, increasing exposure to the American market and opening a major development opportunities in the medium-term in Asia, and enters the cognac category which, with an incidence equal to 8% of pro-forma 2022 sales, will represent the fourth pillar of the group's growth, together with Aperitifs (36%), Tequila (8%) and Bourbon (8%)”.
