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Diageo (DEO) Says 'So Long' to Legendary Cuervo Brand; May Eye Beam (BEAM) as Replacement

December 11, 2012 12:35 PM EST
Diageo plc (NYSE: DEO) shares are looking a little hungover Tuesday following reports it won't bid to retain its key tequila brand.

The WSJ reported earlier that Diageo will lose distribution rights for Jose Cuervo following expiration of its contract next year. News comes as Diageo and Cuervo heirs, the Beckmann's, failed to reach an agreement.

Diageo CEO Paul Walsh said the two sides were unable to reach an agreement which would benefit its shareholders.

Cuervo accounted for about $482.3 million in sales for Diageo in the latest fiscal year, the WSJ noted, with slightly less than 90 percent coming from North America.

The next logical step for Diageo might be a joint bid for Beam, Inc. (NYSE: BEAM), which holds the number two tequila brand in America: Sauza. The news was reported Monday and Diageo might make a bid with Japan's Suntory.

Otherwise, Diageo will have to look elsewhere to fill the tequila void. Other brands Diageo distributes include Captain Morgan, Smirnoff, and Tanqueray. Shares are down 1.6 percent.


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