Summary Description

The board of directors of Diageo PLC, a beverage company, believe that the current economic
environment provides a great opportunity to pursue horizontal acquisitions and develop their
market shares. To that end, Diageo PLC is considering the acquisition of Campari Group.

Diageo Plc engages in the production and distribution of alcoholic beverages. Its brands include
Johnnie Walker, Smirnoff, Captain Morgan, Baileys and Guinness. It operates through the
geographical segments in North America; Europe and Turkey; Africa; Latin America and Caribbean
and Asia Pacific.

Camparie Group,the target company, is the largest player in the segment of spirits, wines and soft
drinks in Italy and owns a portfolio of over 50 brands including Aperol, Appleton, Campari, Dreher,
Cinzano and SKYY Vodka. Production is concentrated in fourteen manufacturing plants. There are
four in Italy, two each in Brazil and Jamaica, and one each in Argentina, Greece, Mexico, Scotland,
Ukraine, and the United States. The firm markets and distributs its products in over 190 countries
around the world. Campari Group has similar operations to Diageo PLC across the same segments
and is a strongly integrated company, suggesting the potential for strategic benefits and synergies.

Camparini had to contend with the near-total disappearance of business in airports and on cruise
ships; intermittent closures of restaurants, bars and night clubs; and serious difficulties faced by
some of their distributors and partners. Amid this exceptionally challenging context, all of the
business group’s activities demonstrated great resilience, with a decline in organic growth limited to
-4,10%. As a result, the firm’s FY 2020 EBITDA declined by -16,6% from €480M to €400M but is
estimated to fully recover by FY2021 end with an organic growth rate of 8,44% and an EBITDA of
€461M. With an EV/EBITDA (LTM) of 46x and a P/E of 53.3x compared to 46.6x and 75.7x
respectively for the Alcoholic industry, Diageo PLC is looking to acquire Campari Group on a full
equity basis.The ownership structure, in which the firm is family-owned at 51%, renders a potential
acquisition feasible.