Investors Are Right to Worry About Diageo's Casamigos Acquisition

Investors are growing increasingly concerned that Diageo (NYSE: DEO) doesn't have a coherent acquisition strategy. While it is trying to cash in on the premiumization trend in alcoholic beverages, the distiller looks like it's taking a scattershot approach and it's not getting good value for shareholders from its decisions.

It's not just the purchase of Casamigos, the tequila with Hollywood star power behind it, that worries them. It also includes the 2015 deal with Casa Cuervo to swap Bushmills Irish whiskey for Don Julio tequila and $408 million in cash. It wouldn't have been so bad had Diageo not just decided to launch a new Irish whiskey label, Roe & Co.

In a letter to its investors, Diageo's eighth-largest investor, Lindsell Train, criticized the moves as inconsistent and said that while they "don't necessarily ring alarm bells, but are definitely of the kinds that need having an eye kept on."

Source: Fool.com