January 28, 2013
LONDON -- News that Diageo (LSE: DGE ) (NYSE: DEO ) has reached an agreement to form a 50-50 joint venture broke today, increasing the FTSE 100 company's global reach.
Diageo has entered into an agreement to acquire a 50% interest in the company that owns United National Breweries' traditional sorghum beer business in South Africa for approximately 23 million pounds. The seeds of the deal were sewn back in November 2012 when Diageo and United National Breweries chairman Vijay Mallya announced they had entered into a "memorandum of understanding" under which they would form the 50-50 joint venture. Today's confirmation reported that the remaining 50% will be held by a company affiliated to Mallya.
The transaction is conditional on, among other things, consent from the South African competition authority and is expected to be completed in the first half of this year.
Diageo's shares lifted marginally on the news and have reached more than 1,860 pence -- putting on almost 60 pence since I earmarked them as a potential buying opportunity less than two weeks ago, suggesting that there are still growth prospects within this drinks Goliath.
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