Diageo has completed the sale of its US and UK wine businesses to Australian wine producer Treasury Wine Estates (TWE).
The company had announced in October that it would be offloading its US-based Chateau and Estate Wines and the UK-based Percy Fox interests for $552m.
The proceeds from the deal, which amount to $489m after tax and transaction costs, will be used by the company to pay off its debts, reported Irish Independent.
The acquisition is said to complement Treasury Wine Estates' other business functions and help the company focus on business transformation.
In October, it was reported that among the US assets of Diageo that the TWE would acquire include are Beaulieu Vineyards, Sterling Vineyards, Acacia, Provenance and Hewitt. It was also stated that TWE would acquire the UK wine brand Blossom Hill, which is considered to be one of the largest wine brands selling in the UK in terms of volume.
The sale is part of a major restructure program for Diageo, which felt that wine does not fit into its core business segment anymore as the UK based drinks company plans to enhance its focus on beer and spirits.
TWE CEO Michael Clarke was quoted by The Spirits Business as saying that the deal is a "game changer which would facilitate the company's growth in the US, Canada, Asia and Latin America."
TWE, which also owns US brands Beringer, intends to enhance its US portfolio in order to chart a turnaround strategy for the Australian company.
In December, Diageo announced that it is planning to revive its vodka brand Smirnoff, following two years of dipping sales in the US.
In the recent years, the attractiveness of vodka has declined with consumers shifting more towards whisky and tequila.
Menezes opined that revival of Smirnoff was top priority.
Vodka represents 12% of Diageo's net sales to around $1.96bn that year, and Smirnoff makes the biggest contribution at 56%.
